Wednesday | 15 January 2025 | Reg No- 06
বাংলা
   
Wednesday | 15 January 2025 | Epaper
BREAKING: ● 5 new principles in constitution proposed; nationalism, socialism, secularism dropped      ● 4 reform commissions submit reports to Yunus       ● Destiny MD, 18 others jailed for 12 years      ● Case filed against former president Abdul Hamid      ● Controversial govt officials to be arrested: Home adviser       ● Zia Orphanage graft: Khaleda Zia relieved from 10-yr jail term      ● NBR's Matiur, wife arrested from Bashundhara      

Market or price control not a good option

Published : Wednesday, 1 January, 2025 at 12:00 AM  Count : 584
MS Siddiqui
There is a concern in Bangladesh that prices of essential commodities, mainly food items including rice, wheat, pulses, sugar, edible oils, ginger, garlic, onion and potato etc beyond the reach of consumers.

In developing economies, price controls of goods are often imposed to serve social and economic objectives. This may be part of government efforts to protect vulnerable consumers, by addressing market failures or subsidizing the cost of essential goods.

The Essential Articles (Price Control and Anti-Hoarding) Act, 1953 empowers the government to fix the maximum price of essential articles from time to timeat retail, wholesale or any stage of sale.The government is authorised to fix maximum prices for the retailer and wholesaler to sell an essential article. It can also fix different prices for different areas of the country.On the other hand, the Competition Commission Act 2012 was enacted to promote market competition to ensure fair prices in the market.

The determination of competitive market is a challenge to understand. Determining and measuring what constitutes an unfair or excessive price is difficult.The concept of 'exploitative abuse' and more specifically the prohibition of an 'abusively excessiveprice'has to be considered one of the most controversial issues in competition policy. The British Director General of Fair Trading on March 30, 2001 stated that a price is to be considered excessive "if it is above that which would exist in a competitive market". 

Unfortunately, the fixation of prices for essential commodities by the government has brought little relief to consumers, as these items cannot be purchased at government-fixed prices anywhere in the markets. The modern market management give priority to the market competition to fix the fair price rather than government authorities. The policies of fixation of price and competition policy is conflicting.

Government has some other options. Replacing price controls with expanded and better-targeted social safety nets, coupled with reforms to encourage petition and a sound regulatory environment, can be pro-poor and pro-growth. Bangladesh government is also trying to deliver some essential goods to a certain section through the Trading Corporation of Bangladesh (TCB). They areimporting/ buying some essential products from local manufacturers and selling at subsidized prices to a very small number of consumers with very little impact on consumers sufferings. 

Any such intervention in the market may also backfire in certain cases. TCB may make certain goods and services more affordable but price controls can also lead to disruptions in the market, losses for producers, and a noticeable change in quality.

In the book "Porarthoporotar Orthoniti", Dr. Akbar Ali Khan, a former civil servant, provides a glaring example of how such initiative can be counter-productive. When he was aSub-divisional Officer (SDO) of a sub-district in East Pakistan in the 1960s.The thanmilitary government increased the penalty to Tk 150 to prevent mixing water with milk. However, the actual outcome was the opposite because, in order to avert a fine, the milkmen had to pay bribes to sanitary inspectors. To make up the extra money, they had to add more water to the milk and as a result the quality of milk was further reduced.

In the recent experience also not different. The honorable finance adviser Dr Salehuddin Ahmed expresses his experiences, "There are various kinds of syndicates in the market. If the government tightens controls too much, it may backfire," he told reporters on 18th December 2024, after a meeting of the Advisers Council Committee on Government Purchase (ACCGP) at the Cabinet Division.

The experience shows that no permanent solution can be achieved by fixing the prices of products unless the market players face competition to improve efficiency and innovation. For example, the price of Egg per piece - In Bangladeshis Tk12.50- Tk13.75/-, on the other hand, in Pakistan is Tk6.08-Tk9.83/- and in India Tk6.75-Tk8.00/-. Government has allowed import of raw materials of feed, vaccine, machinery and accessories etc., import duty is zero percentage (0%)andimpose restriction on import of egg. The poultry sector is not facing competition, so they become inefficient. 

Price controls often lead to problems such as:- shortage and shifting the products to illegal market and deteriorate quality as the producers or sellers try to increase the price to coverup the losses or additional cost of dealing in illegal market.

Finance Adviser Dr Salehuddin Ahmed said on 18 December 2024 also said that-- Price controls can lead to hoarding and the fostering of black markets. Price controls are the opposite of prices set by market forces, which are determined by producers because of supply and demand.

Price controls come in two forms:- price floors and price ceilings. The price floors are the minimum prices set for goods and services. They may be set up by the government or, in some cases, by producers themselves. The ceiling price is the minimum price fixed by the government or the producers. The act of producers are illegal and anti-competitive as per law of competition. Minimum prices are imposed to help producers when authorities believe that prices are too low, leading to an unfair market. 

The use of price controls can have adverse consequences for growth for several reasons. The Price ceilings can depress producer margins and discourage local and overseas domestic investment. The benefits of price control often are to the affluent section. For example, the subsidized price of fuels like petrol, oil and gas etc are mostly benefited to the upper section of people.

Bangladesh need a carefully designed and properly enforced Competition and consumer protection laws. The Competition Commission Act 2012 need some amendment as suggested by peer review by some experts of other countries. Most importantly, Bangladesh need a competent competition commission carefully selected expert from legal and economics background. The commission should have a research wing for constant study of the markets to identify the anti-competitive situation in the different markets and activities of different market actors. These are essential components of institutional frameworks that support market mechanisms. 

Bangladesh authorities have a mindsetof punishing the law breakers and hardly take initiative to prevent the market manipulation. The competition commission must put emphasis on the prevention of anti-competitive activities with constant research and market reforms. A sound legal and regulatory framework and competent commission can provide a more effective response to many of the problems that 'price controls' fail to address. The authorities may take notes of the experiences of Dr Akber Ali Khan and Dr Sahehuddin Ahmed.

The writer is a former Non-Government Adviser, 
Bangladesh Competition Commission and Legal Economist & CEO, Bangla Chemical  



LATEST NEWS
MOST READ
Also read
The price of impunity in Gaza
Some remedies for digestive problems
Shortcomings of VAT and tax hike policies
Commercial importance of date molasses
Bangladesh's legal sovereignty vs ICC's western strings
How climate change impacts urban pregnant women
Political turmoil poses tough challenges for our business
Neighbours covet a stable Rakhaine
Editor : Iqbal Sobhan Chowdhury
Published by the Editor on behalf of the Observer Ltd. from Globe Printers, 24/A, New Eskaton Road, Ramna, Dhaka.
Editorial, News and Commercial Offices : Aziz Bhaban (2nd floor), 93, Motijheel C/A, Dhaka-1000.
Phone: PABX- 41053001-06; Online: 41053014; Advertisement: 41053012.
E-mail: district@dailyobserverbd.com, news©dailyobserverbd.com, advertisement©dailyobserverbd.com, For Online Edition: mailobserverbd©gmail.com
🔝
close