Onion and salt economics: Tears and fears of commoners
Dr. Aslam Mia
Skyrocketing onion price overnight probably the talk of the year among commoners in Bangladesh. Anyone with a general sense in economics could simply guess how the market price of any product is determined through the interaction of demand and supply, which we call it laissez-faire. But that very basic principles of economics got it wrong in our case. The skyrocketing price increase is not only determined by the supply or demand of onion but also by the greedy businessmen and hoarding behaviors of wholesalers/ distributors.
The moment India announced ban/cap of its onion export to Bangladesh due to their domestic reasons, wholesalers and distributors started hoarding their supply that leads to further increase in onion price. This increase in price brings tears and fears to commoners because they cannot afford to buy onion at that dramatic price and have not had experienced having their meals without this important spice.
So, it brings tears and fears that onion will be out of hand for millions and for the unforeseeable future. Although its late, but thanks to the recent initiatives taken by the government to bring onion by plane from Egypt to cool the market. But how long it takes the onion market to cool and get back to its original form remain uncertain.
The issue has been further aggravated by the shocking increase in salt price a couple of weeks ago from a mere Tk 30/kg to Tk 100, which we domestically produce and import not so significant amount. We did not observe any natural calamities/incidents to an extent that has lowered the domestic production of salt by a significant amount. Then why the price has increased? The answer is the same again, because of greedy businessmen/wholesalers/ retailers.
These two independents but highly correlated incidents within a short course exposed many deficiencies of the various government ministries and relevant agencies. Obliviously, they cannot deny their negligence and accept that the commodity market mechanism in Bangladesh needs major reform.
When the market does not behave as it supposes to and laissez-faire system is broken, then the government must intervene to protect consumers interest and welfare of the citizens. How fast the government reacts and responds to market misbehave shows the quality, efficiency and strengths of the government institutions. The recent two incidents certainly reveal that the quality of government institutions is not at par as they have failed to hold the neck of onion price hike. So instead of changing/suggesting the consumption pattern overnight, which possibly needs decades or generations, government should focus on commodity market reform to prevent repetition.
The price increase also revealed how sensitive are the consumers in Bangladesh. This sensitiveness should not be a ground for the speculators to make millions at the cost of commoners. If we cannot stop these practices, the we must acknowledge that we have failed to protect the interest of commoners.
To formulate effective and efficient market mechanisms, the importance of institutional strength and visionary mindset is significantly important due to political uncertainty and trading behaviors of the country. A major revamp becomes also a necessity to review the existing importing contracts of various commodities to prevent dramatic increase in price. On the other hand, it also teaches us not to depend on a single country for importing a product, be it onion or others. This is like putting all your eggs in one basket!
Another must and immediate actions the government should take is to find out the responsible parties behind this price hike of onion and salt. A cash penalty has not been so effective based on the previous experience to combat artificial price increase because the gain is far higher than the cost. Thus, the government should bring those responsible to the court and revoke their trading/importing license. If cash penalty does not stop them from illegal market practices, then stern actions should be taken and ensure that they get the maximum punishments for creating noise in the market.
Lastly, well-equipped, resourceful and well-coordinated government institutions could be the stepping stone to protect the interest of commoners and prevent the repetition of price hike for basic commodities in the future. Government actions from this lesson will tell us how deep we have to cry and fear in the future with or without peeling onion or unpacking salt.
Dr. Aslam Mia
School of Management
University Sains Malaysia (USM), Malaysia
Email: [email protected]