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Business

May 18, 2018

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Better management needed to control prices in Ramazan

Better management needed to control prices in Ramazan

LAHORE: Keeping prices normal in Ramazan needs proper planning and good management. Prices cannot be controlled with subsidies or administrative orders when the supplies are less than the increased demand during the fasting month.

It is simply a question of demand and supply. We see reduction in rates of beverages and soft drinks during Ramazan. There is a slight reduction in edible oil rates as well. These are few of those items that are consumed two to three times more in this month. The only reason is that the supplies of these two items are higher than the demand in the market.

Manufacturers of these two items increase production as they anticipate higher consumption. This cannot be said about fruits. Although, the demand for fruits also increases two to threefold in Ramazan, there are supply constraints.

Less fruit is available than the demand in the market. Fruits are perishable items and cannot be stocked for even a week. Even the poorest families try to buy some fruit for their families during this month. The prices of banana go up more than the prices of apple that has longer storage time. Similarly, the rates of tomatoes cannot be controlled when the demand is higher. Some governments make efforts to control the rates of items that are in short supply.

This results in forcing the shopkeepers to remove those items that they cannot sell at the controlled rate from the shop. However, the same items are supplied through back doors at much higher prices. Government should take measures to keep the rates of many other items in reasonable limits through prudent planning. Besides perishable fruits and vegetables, there are other items that see manifold increase in consumption during the fasting month.

These include gram, gram flour, wheat flour, dates, onions, potatoes, and sugar. The rates of all these items go up because of short supply. Higher supplies can be arranged through proper planning. These are not perishable items and can be stocked by provincial governments.

Almost all the provincial governments provide some sort of subsidy during the fasting month. The amount of subsidy runs into billions of rupees.

Each provincial government should assess the availability of these food items four months before Ramazan. They should also assess the average monthly consumption of these items.

Then they should arrange (even if they have to import) average quantity of each item needed for one month. They should use the amount reserved for the Ramazan package.

This way they would ensure double the average supply of these items in the market. They can then release the stock in the special Ramazan bazaars at their cost price, including administrative expenses. The prices would remain in control because of increased supplies. The government would get back most of the amount reserved for subsidy.

It has been found that the provincial governments spent the highest amount of flour subsidy. The subsidized flour is made available to everyone.

If this subsidy is made available to the millions of families that are registered under the Benazir Income Support Program, the subsidy amount would be substantially reduced. Instead of giving a subsidised flour bag, the government should electronically transfer the subsidy amount in the accounts of BISP card holders.

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