The Financial Express

TCB's capacity for stalling price spiral

TCB's capacity for stalling price spiral

For months price spiral of food products, especially kitchen products, has made the already critical situation even worse. And now in the month of Ramadan, prices of most daily necessities are shooting through the roof. Kitchen markets all over the country are experiencing price hikes on almost a daily basis. While meat and fish markets are beyond the reach of most low-and low-medium-income families, prices of onion, cooking oil, sugar, vegetables and scores of other daily provisions are on a steep rise. The reason commonly attributed to the unusual price increase is disruption in supply chain. There is also every reason to believe that market syndication could be playing its part-- characteristic as it is as an annual feature prior and during the Muslim fasting month. The government has no market intervention mechanism worth the name to prevail on short supplies or profiteering intent of big syndicated traders. The state trading agency, the Trading Corporation of Bangladesh (TCB) with its limited resources is thus the last resort for the government to intervene in the market.     

This year, too, the TCB has reportedly started selling essential commodities weeks before the Ramadan. The items that are mostly in high demand during the month of fasting - onion, edible oil, sugar, lentil, dates etc - are sold at subsidised prices to consumers. This is a regular annual phenomenon, and as the practice goes, the TCB every year appoints thousands of dealers to procure products from its godowns for sale at different parts of the country at prices set by the government. Beside the dealers, the TCB also runs its own outlets in the capital and divisional headquarters.

No wonder, because of the price spiral before the month of Ramadan, the TCB figures regularly in the media---albeit for the wrong reasons. It seems, ironically though, that there is a correlation between the TCB's open sale of the aforementioned items and the shooting up of market prices. In other words, what is being deemed as market intervention serves to fuel the price surge. Or, one may say, the plan to intervene in the market is so ill-conceived and botched up that it is no more than a month-long routine exercise with virtually no strength inherent in its methods to tame the market.

This, in other words, goes to suggest the failure of market forces in playing their role in governing market behaviour during the holy month as they remain muted by a stronger informal market force steered by market syndication. Now, if this is taken for sure as too strong an influence, then there are questions as to the legitimacy of the state trading agency, the TCB. 

In this context, it must be noted that there is no reason to confine the role of the TCB to the month of Ramadan alone. The important issue that should be looked into is whether the government wants it to function as a strong, capable market restraining force. As a state trading body, this should be its principal objective, but the reality is that it is not at all equipped with the capacity to bring even a semblance of stability in market prices by way of its seasonal interventions. As a state trading organisation, it was neither groomed nor empowered with the resources and freedom to prevail on the market as successive governments have vainly tried to bloat its capacity.

Given that the TCB is a public sector enterprise, there has not been any mechanism in place so far to see it emerge as a business entity-an essential trait it was to assume long back. A quick reference to similar organisations in neighbouring India will reveal the lacunas embedded in TCB's opertations since its very inception. The reason similar agencies there, numbering about a dozen, are strong enough to neutralise undesirable price instabilities lies in the basics-freedom of operation, and financial and professional resources. Although initially provided with endowment funds by the government, they operate entirely on their own income just like a private sector business house, engaged throughout the year in bulk imports and exports, and intervention in the market, when necessary.  To provide the much required dynamism to the operational challenges, the CEOs of these agencies often come from the private sector.

The key issue is the strength to effect successful market intervention by the state trading body.  Strength does not come from the word of mouth. It needs to be innate in a well planned and calculated process. The very capacity to do so calls for strong legal, institutional and financial backups. Market syndicates will obviously be the big rivals and breaking the oligopoly and monopoly of organised market syndicates will require the TCB to be thoroughly professional in the first place. In this, allowing it to function independently with sufficient resources is a foremost prerequisite.

No doubt, the month of Ramadan is a test case for the TCB to try to curb untoward market behaviour and its eventual failure to do so. We see this happen every year, and it is the built-in constraints of TCB that stand in the way of its success. Experts are of the opinion that with competent manpower and a sizable endowment fund added to its existing financial resources, it can be expected to operate in small-to-medium scale trading round the year, and intervene in the market when necessary. 


wasiahmed.bd @gmail.com

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