In recent months, there has been almost a steady rise in the prices of essential commodities in Bangladesh, affecting everyone including the business community. Different chambers and associations in the country have identified a number of reasons for the rise and provided some suggestions. According to Dhaka Chamber of Commerce & Industries (DCCI) there are two main factors: the domestic factor and the international factor.

The domestic factor

1. Lack of market price supervision

2. Toll Collection

3. Increase in carrying costs/transportation costs

4. Fear in the business community affecting import

5. System loss due to delayed transportation of perishable items

6. Middlemen's & Brokers' greed & tyranny.

7. Advance purchase for Ramadan & Eid-ul-Fitr, etc.

The International factor

1. Increase in the prices of petroleum & petroleum products

2. Increase in transportation costs

3. Increase in the Export & Import gap

4. Increase in the exchange rate of the dollar against Bangladesh Taka

5. Increase in government borrowing due to import of oil at a higher price (now US$ 70 per barrel), etc.

Hossain Khaled, President of Dhaka Chamber of Commerce & Industries (DCCI), observes, "A business person does business to make profits. However, there should be a proper monitoring cell of the Government so that those who are particularly doing food business do not try to gain excess profits." To give an example of such profit making he points out the case of some business people who charge Tk.300 for renting out a truck when the charge should not be more than Tk.100. "This type of irrational profit making business people should be identified. It is not possible for us to do this; it is the monitoring cell of the Government that can identify them. Once they are identified we can take necessary steps to stop them making such irrational profits."

But too much interference by the Government may have a negative impact on the market, warns Khaled. According to him, the Government monitoring cell should keep an eye on those businessmen who are making excess profit and take proper actions against them while encouraging honest businessmen to do business without fear. "There is no doubt that to keep the prices of essential goods within the reasonable range, supply must be plenty which means we need the businesspeople to be very active in the market." But to get more actively involved, businesspeople need to have a confident feeling that they need not fear any government action. In other words, there is a need for confidence building among them. "Building up confidence is like inflating a balloon-you can pump it thoroughly but a slight touch of a pin is enough to make it blast."

Referring back to the supply issue, Khaled points out, "Last year about 24 lakh tons of food was imported but in the current year it is just 11 lakh tons." He thinks the price of rice plays a very important role in influencing the price of other essential commodities in the market. "40% people of Bangladesh are still below the poverty line; they have to eat panta (rice in water) with onion and salt, so we should ensure enough supply of this basic food. If we can reduce the price of rice, the price of other commodities will fall. Therefore, enough supply of rice should be ensured through regular import of rice in optimum quantities."

Saifuzzaman Chowdhury, President of Chittagong Chamber of Commerce & Industry (CCCI), thinks the continuous rise in the prices of essential goods in the market has much to do with that in the international market.

"Before, availability of edible commodities in the international market was enough and price was affordable, but for the past several years the production of agricultural goods has fallen dramatically because of excessive rain and drought in some food exporting countries like India, Pakistan, Australia, Malaysia and Russia. Besides, cultivable lands have been reduced because of rapid urbanization and industrialization," observes Saifuzzaman. He adds, "Some exporting countries have already reduced agricultural subsidies and have been discouraging exporting by imposing tax on export and by other means as well. So, prices are high. Also, as the exchange rate of the dollar against Bangladesh Taka has increased, import has become expensive. Ocean freight has doubled in recent years. Fuel cost has increased which in turn has caused an increase in the production cost of agricultural products."

Apart from the two chambers, ET contacted the Federation of Bangladesh Chambers of Commerce & Industry (FBCCI). Here is what the federation has to suggest.

• If the interest rate for import becomes 10% it will be beneficial to the market, we think. We are requesting Banks to keep the LC margin & commission at a minimum level.

• Recently government has withdrawn import tax from some essential goods. Import tax on edible oil has already been reduced by 5%. Price will go down more if VAT is deducted from it. Also, we request all the businessmen concerned to follow the prices set by the BDR & Edible Oil Refinery Owners Associations.

• At the time of opening LC, unnecessary questions are often asked especially concerning depositing and withdrawing money. This creates fear among the businessmen and thus hampers the normal business.

• Permission should be given to the importers to purchase dollars at a competitive price from any bank.

• The profit margin is very low in the wholesale business, but for income tax 10% of revenue earnings is assessed as gross profit. We request stopping this type of assessment.

• For keeping the market stable private importers should come forward to import essential commodities.

• Government has to take realistic steps about storage; it should be ensured that businessmen do not face any harassment for storing goods.

Suggestions from Chittagong Chamber of Commerce & Industry (CCCI)

1. Zero LC margin should be set for importing essential commodities like rice, wheat, edible oil, sugar, onion, lentils, spices & chola, for coming Ramadan.

2. Although the interest rate has been reduced to 12% for 10 essential consumer goods it should be reduced to the single digit.

3. At present, for several reasons, essential goods are not adequately available in the international market. This shows importing these goods when needed may be very difficult so building buffer stocks becomes necessary to meet demand in the market.

4. Govt. should provide special subsidy for importing consumer goods so that prices remain within the purchasing power of the general people.

5. In our country, Taka is often devalued so the exchange rate of the dollar against Taka gets higher at the time of paying tax & bank loan than that at the time of opening LC. This is one reason why prices of imported essential items are increasing in the local market. So, the base of the exchange rate needs to be stabilized.

6. Permission should be given to the importers to purchase dollars at a competitive price from any bank because often importers have to buy dollars from the selected bank at a price higher than other banks.

7. Middlemen are highly active at different stages between farmers and consumers. As a result, farmers do not get the right prices for their products. At the same time consumers pay excessively, which makes them feel like being cheated. So an alternative distribution channel needs to be developed.

8. Price Controlling Board should be established in coordination with the public and private sectors.

Suggestions from Dhaka Chamber of Commerce & Industries (DCCI)

• Commodity Exchange should be established in all four corners of Dhaka Metropolitan City with good connectivity by Rail, Road and Waterways networks.

• Khas land should be leased out to farmers who have lost land due to erosion and also for rehabilitation of flood affected people.

• Agricultural credit should be given free of interest to flood-affected farmers to revitalize the rural economy.

• More agricultural product markets like Kawran Bazar should be established in the four corners of Dhaka City; logistic & connectivity may be established with rural collection centers for smooth supply chain management.

• Essential commodities like daily provisions and perishable items can additionally be allowed to be sold in specified areas to be earmarked by the govt.

• Transportation of goods should be made easier, cheaper and quicker by streamlining all modes of transportation and eliminating extortion of all sorts from rural areas, towns and cities. Special attention may be given to reducing tolls at Jamuna Bridge for movement of trucks loaded with agricultural products and essential commodities.

• Goods trains may be introduced for carrying agricultural products.

• Imports of essential items must be encouraged by reducing tariff and other taxes and by simplifying import procedures. Formalities for import of essential commodities such as rice, lentils, sugar, edible oil and milk food must be curtailed and the commodities must be allowed to be imported on a fast track basis.

• As a long-term measure govt. should adopt "Consumer Policy" and "Consumers' Protection Act" in line with those in India and Pakistan.