TCB’s operation is much lower than required level
As the price of commodities soar higher and higher, the Trading Corporation of Bangladesh (TCB) has stepped up to help people suffering from sticker shock. But is it proving up to the task and can it do more? To find out, The Business Standard spoke to economist and academic Selim Raihan
The price of essential commodities has skyrocketed on the back of the pandemic and the Russian invasion of Ukraine. The working-class are bearing the brunt of soaring prices. To lessen the suffering of the poor and marginalised people, the state-run agency Trading Corporation of Bangladesh (TCB) is selling some essential commodities at a fair price.
But, is TCB successful in helping the hapless ones? The Business Standard spoke to South Asian Network on Economic Modeling (SANEM) executive director Selim Raihan, Professor of the Department of Economics at the University of Dhaka to delve deeper into the issue.
The Trading Corporation of Bangladesh (TCB) is supposed to play a key role in keeping prices of essential commodities stable for the poor and marginalised people. Isn't it better to scale up the agency's capacity when a huge number of people are feeling the pressure of inflation? Should TCB try to increase its market share to keep the price stable?
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I think it is hard for TCB to increase its market share because of the size of the consumer base. If TCB wants to go for large-scale market intervention, it will need huge investment, an ambitious feat.
Again, it may create new types of problems like corruption and other anomalies. There is a chance that some will find ways to sell TCB's products at a higher price in the open market.
What TCB should do is implement the task efficiently. To do so, TCB will have to conduct an assessment at a critical moment of how many essential commodities it can supply for the poor and marginalised people. It will have to estimate the demand size as well as the supply size.
The state-run agency can procure essential commodities in advance so that they can intervene in the market at the right time. TCB is trying to do that but it is quite insufficient.
Even during the time of Covid-19, it has been observed that the supply was not sufficient. And it is because the government does not have any updated data about poor people. Does the government have data on how many families need assistance now? I believe they do not have any.
The government estimates the number of poor and marginalised populations based on the poverty rate of 2016. [And] TCB is operating based on backdated data, which is misrepresentative of the actual situation. I think it underestimates the demand by up to 40-50 percent.
SANEM as well as some other organisations conducted research during the pandemic and found that the poverty rate has increased nearly two times. We did not see any government research, data or survey on it yet.
Now is the time the state-run TCB should double its operation and capacity. [However] TCB lacks capacity in terms of warehouse as well as manpower and sufficient funds. But the problem is TCB, it seems, believes that what they are doing is enough. For this reason, they do not feel the urge to increase their capacity.
If TCB believed that it needed expansion, then it would have taken initiatives to import and stock and sell more products for more people. The government has many warehouses, and TCB can see if it can use them.
There are some seasonal problems like Ramadan and some sudden problems like the Ukraine war. Some are predictable and some are not. TCB should take preparation for tackling both types of situations. They need to have the estimation of minimum and maximum resource requirements. I strongly believe it lacks this very assessment.
We notice that they are smug, feeling they are doing well. But the scenario is different. There are long queues of people waiting in the hot sun for hours to buy commodities. Many are going back empty-handed after waiting for hours. That means the operation is insufficient in comparison to demand.
For example, the government does not have any updated data on the supply and demand of essential commodities. What is the demand size of rice in the market now? It is estimated based on the backdated per head consumption.
If we think the population size is around 16.5 crore and the real figure of the population is 17.5 crore. The mismatch of one crore of the population can hugely affect the price in the market. Even some cabinet ministers expressed dissatisfaction with the lack of updated data on essential commodities.
I think the main reason behind the price hike is the supply and demand data is absent. What we need now is an assessment. It's a must.
Do you think the government should provide ration cards to poor and marginalised people to ease their suffering?
I don't think the government is going to provide ration cards. What is the main purpose? It is to provide the poor with essential commodities at a fair price. So, the government will have to ensure that those who deserve to get the essential commodities get the cards, irrespective of if they are ration cards or fair price cards.
We have seen that during the Covid-19, the government provided financial assistance to poor people across the country. But many people who were not supposed to get the money got the money using different names. How was that list made? Was there any transparency and accountability there?
The real people who needed this aid were they included in the list? First, the government will have to ensure these. It does not matter whether it is a ration card or a fair price card. But I believe this kind of card is necessary.
How will the government make the list? They have no data. During the Covid-19 pandemic, many people became poor. But does the government have any data about them? I did not see any.
A large number of people who should get the card are garment workers. Why hasn't the government already signed a contract with the RMG owners' association? If the ready-made garment owners take the initiative of launching this type of card, the pressure on the government will ease. In places where the private sector has the scope, they should come forward and the government should encourage them.
The government can arrange the system at the factory level too. The garment factory owners can set a ceiling that workers under a specific salary can get a card and buy essential commodities at a fair price. In such cases, the garment owners can provide the government with space and TCB can open an outlet in the garment factory.
Another area is the Corporate Social Responsibility (CSR) of the private sector. The private sector can contribute from their CSR fund at this critical time. It is a temporary situation, it will not last forever. The government will, of course, play the leading role. It is hard for the government to handle the situation by itself.
Like the RMG factory owners, the government can include the NGOs in the process of making lists of the poor people because the NGOs give microcredit. They have a huge network and database. I think information sharing is very important now. The administration makes the lists [but] there is no cross checking. The NGOs and volunteer organisations can help the government to make an effective list.
What can be done to control the price of essential commodities now?
Inflation is rising around the world. It is inevitable and we all have to endure the situation. We will have to bear in mind that it will not go away soon. But we will have to be careful whether the supply of an essential commodity is normal or not. We will have to monitor the commodities that we produce in our country.
In the case of imports, we have to monitor other products because due to the Ukraine war, the price of wheat and edible oil is rising. We will have to seek an alternative market for sourcing the products.
We will have to develop a regular monitoring system. I believe that now is a time to become highly digitalised. The commerce ministry needs to develop a price monitoring system whose task will always be to provide updated information about the global price movement. Many countries forecast the price after two months. What we do here is situational analysis.
There are some commodities whose custom duties and tariffs are very high. We will have to rationalise the duty. We should withdraw the duty quickly on the essential commodities whose price is increasing. Many businessmen cash in on the price hike [and] we do not see the government taking action against them in most cases.
There is a Competition Commission whose task is to see if there are any anti-competitive practices or if someone is hoarding essential commodities or driving up the price irrationally. The Competition Commission can take action. Unfortunately, we are not seeing any role of the commission in market monitoring.
The commission should have been more active now and looked into who is increasing the prices and whether the price hike is rational.
How do neighbouring countries like India tackle inflation?
The flow of information is better in India in terms of demand and supply. Institutions akin to our Competition Commission are more powerful there. The programme for targeted low-income people is stronger.
Disaster Management and Relief Ministry, who run a lot of social safety net programmes, has sought Tk10,865 crore for the forthcoming fiscal year's budget which is only 9.19% more than the current allocation. Do you think it will be enough to ease the impact of the rising inflation?
There are more than 20 ministries and divisions providing social safety net facilities. So, I can't really comment on just one ministry's allocations. But I do believe we need to increase overall safety net allocations in this current scenario.
