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Prices
Crisis overview What
price the basic amenities? trickery 'If we act
against hoarders...'
Come Ramzan, and there the
common man goes -- bust. Thanks to our economic It's about the same ol' vicious circle where one bad thing leads to another, and the other must lead back to the first. The common man can grouse and grumble, but he cannot do without picking up stuff from the market -- whether or not the price tags are intimidating. In fact, Ramzan means more intensive shopping; thereby creating an artificial demand. The grower of a certain crop also has practically no choice but to get his produce to the market. Though, the retailer will always save the day by selling fruits, vegetables and like items at exorbitant prices. Eventually, it's the middleman (or hoarder) who calls the shots. And, most certainly it's the consumer who gets to suffer the most. The government says that it is trying to control prices, for the purpose of which it is devising new laws. For instance, it is considering levying a 40% duty on the import of flour (atta) to Afghanistan and neighbouring areas, so that the commodity cannot be moved outside the country. It is also trying to eliminate the middleman culture. But, so far, it has failed to help matters. The common man can only hope (against hope?), but 'inflation' is a much-dreaded word. And, unfortunately, it is being heard a lot this Ramzan.
More than making-do, the salaried man's dilemma today is trying to secure the best possible in the market but within his limited resources By Shahzada Irfan Ahmed "My choices are
limited, as mine is a hard-earned job. I cannot afford to lose it, however When he came here, his job was to maintain records of the company's sales. It has taken him a good 10 years' work to win his current slot. Though his name has moved up in the organisational chart, the salary cheque that he carries home has not changed a lot. He says dejectedly that over the years he has won the trust of the owners but not achieved much in materialistic terms. Azhar says that the rate at which his salary has increased over the last 10 years is a fraction of the rate at which the prices of essential commodities, especially the food items, have increased during the same period. "When you stick to the same job for a long period of time your employer takes you for granted and neglects you altogether. A pat on the back does boost your morale but it cannot fill your empty stomach," he adds. This is no doubt the phenomenon confronted by most of those belonging to the medium-range salaried class of professionals. With little or no savings at all, they hardly dare to quit a job even if they feel it's getting more and more difficult for them to continue with it. Life becomes tougher for them also for the reason that their level of awareness as well as that of their families is much higher than that of a typical businessman or a grower. "I had heard in my childhood that ignorance is a blessing. Today, I have realised what it exactly means," says Nadeem Khan, assistant manager at a car showroom in Karachi. Nadeem tells TNS that though his major spending habits remain uniform for most of the year, some unforeseen expenditure has to be made every now and then. "My children want to dine out at popular food chain outlets, my wife likes shopping around, I want to change the model of my car and am desperate to send my children to the best schools in town," he says. But at the same time, he says, he knows that he would never be able to see all his dreams come true. Nadeem, whose most of the relatives run small or medium scale businesses, tells TNS that many a time he has to overspend just to prove that he is not low in financial stature as compared to his relatives. Ashiq Ali, sales manager at a leading life insurance company, says that the salaried class is the foremost target market of insurance and consumer financing businesses. He tells TNS that he has observed that the medium-range salaried class thinks logically and is most of the time interested in improving the quality of their life even at the cost of their savings. Therefore, it is much easier for us to convince them to ensure the future of their dependents. On the other hand, shopkeepers, retailers and traders are not ready to listen to insurance companies' agents and prefer to reinvest in their businesses than to buy insurance policies, he says. Another popular observation is that many salaried professionals fail to keep record of where all their salary goes. Citing his own case, Ashiq says: "Every month, I try to cut down on my expenses only to find that they keep on rising and haunting me everyday. When you feel like saving something, your child comes to you with a slip issued by his school. These schools can demand any amount at any time, with or without citing any reason." Just like they are exploited by their employers they are blackmailed by the schools where they send their children to learn. Abdul Mateen, manager of a courier company, tells TNS that he has to take his family along to the place wherever he is posted. So far, he has served at 10 different stations all over the country. "Every time I have to deposit hefty admission fees to get my children enrolled in schools at new places. Similarly, six months or one year's rent has to be paid in advance to rent a house at these places. Despite knowing all this, our company gives us a nominal dislocation allowance that adds insult to the injury," he says. While those complaining about exploitation at the hands of their employers can be found easily, there are even those who are all praise for their bosses. Employees of multinational and some leading local companies say they need to worry little as their organisation takes care of all their needs. Muhammad Nazakat, a civil engineer employed at a major construction firm, says that his organisation provides him medical cover, house rent, maintenance of office car, fuel allowance, bonuses and other incentives. "This results in minimal pressure on my pocket even when the prices are at their peak." Economic experts believe that the middle and upper range salaried class has contributed a lot in bringing about the unprecedented boom in the credit market. This class can avail all types of financing facilities ranging from auto financing, credit cards and house financing to easy loans and smart plans. "It's always easier and safer to process their cases as members of the salaried class always have relevant documents with them," says Muhammad Ashfaq, representative of a foreign bank. He goes on to say that typical traders never maintain their accounts properly nor pay their taxes. Similarly, they avoid banking channels and deal in cash which makes their cases weak. "On the other hand, the salaried class is organised, gets salaries through banks, pays the taxes applicable on them and has a sustained monthly income. In short, the banks and leasing companies have no qualms while providing financing facility to them," he adds.
Given the current economic system and the policies of the government, it is quite improbable that the fate of the people with low-income could be altered for the better By Aoun Sahi Shakeela, 38, is a mother
of six -- four daughters and two sons. She lives in a rented, Shockingly, however, for Shakeela life has become "even more difficult!" Being the head of the family -- and a female, for that matter -- means that she has to execute the most difficult task in the house, that is, managing budget. "A significant chunk (Rs 3000) of our income goes away in house rent every month, while we have to cough up between Rs 2000 and Rs 2500 in the shape of electricity, gas and water bills. In this way, I am left with Rs 3000 to Rs 3500 in which I have to arrange for food to feed the eight members of my family and also pay the school fees of my three children. "There are times when we can cook food for just one time a day," she goes on, "I've never bought fruit for my children. Meat is not easy for us to buy. Even milk is not affordable and, certainly, tea is a luxury." According to Shakeela, with the way the price of flour is increasing, there might soon come a time when 'roti' will be a rare commodity in her home. "In the last six years we must have changed at least seven houses, because we would not be able to arrange for the rent. We cannot go to Peshawar to meet our near and dear ones because it's not easy for us to arrange for the bus fare." Shakeela further says that she came to Lahore with the dream that her children -- especially her sons -- would get a chance to study in school. But, she found that she could not bear the expenses of school education. Her fear is that her young sons might end up going to work with their father. "Our earning has been the same for the last two years, whereas the prices of everyday items has increased manifold," she continues, "The government should at least provide the poor with houses, if it is serious about changing the conditions of people like us." Sadly, the condition of the people belonging to the low-income class -- who might not be homeless -- is no different. They are more or less faced with the similar problems, with no solution in sight. "My two sons and a daughter go to school and college, and I spend around Rs 2500 on their educational expenditures every month," says Muhammad Nasir, a 45 years old resident of Sant Nagar, Lahore. Nasir is living in his family home. He works in a private factory "for 14 to 16 hours daily" and earns only Rs 10,000 a month. Due to the perpetual price hike of commodities, it has become almost impossible for his family to sustain in such a meagre amount. "Last month, one of my children got seriously ill and I had to admit him in the hospital as per the doctor's suggestion. He remained there for three days for which we were charged Rs 10,000, which is my one month's income," he told TNS. According to Nasir, Ramzan -- which is a month of blessings -- somehow "always brings difficulties for us. It seems that only the heavenly 'shaitaan' is imprisoned in this month, while all the earthly 'shaitaans' move about freely on earth." The most difficult occasions to manage for people like Nasir are festivities such as Eid or even weddings in the family. "You know, I pray to Allah that there may be no such function in the family, otherwise I always end up in debt." The reality is grim, even though the government officials continue to paint a brighter picture. Dr Salman Shah, advisor to prime minister on finance and economic affairs, claimed early this year that the living standard of the people in Pakistan is improving at a great pace. To substantiate his claim he added that the number of vehicles, motorcycles and mobile phones was multiplying every year which "shows that the people are getting richer and richer, and they have surplus money to buy such commodities." He told the media that all of the above had become possible because of the people-friendly economic policies of present government. Experts think that it is almost 'un-doable' that the condition of the people with low-income could be changed, given the present economic system. "It is true that the living standard of our people has improved in recent years, but they are the people who fall in the higher-income bracket. Whereas, the condition of people belonging to lower middle class is getting from bad to worse," says economist Dr Qais Aslam. According to him, the trickle-down policies of the present government have totally failed to change the condition of the poor, and the prices of different commodities continue to soar. "They need to adopt a trickle-up policy and provide free education and training to the children and the youth belonging to the low-income class. This is the only way to change their fate. Otherwise they should be prepared to face the consequences." The retail outlets sell fruits and vegetables at exorbitant prices, since they believe they too paid excessively to the middlemen. Where does that leave the consumer? By Hamid Waleed The prices of vegetables
and fruits have skyrocketed at the retail level because of the The consumer in a metropolitan city -- particularly from the middle and the lower middle classes -- is the hardest hit by the illegal and immoral trade tactics of the growers, hoarders, stockholders and investors. It is a pity that a constant increase in the prices of vegetables and other essential commodities, despite sufficient production of vegetable and fruit in the country, has made the lives of most limited-income level families miserable. Being an agrarian economy, Pakistan is self-sufficient in the production of vegetables, fruits and other essential food commodities throughout the year. According to the official figures, Pakistan produces 7 million tonnes of vegetables annually, including the production of 2.5 million tonnes of potatoes and 2 million tonnes of onion, with another 2.5 million tonnes of mixed vegetables. In other terms, Punjab produces 60 per cent of the total vegetables in the country, followed by 13 per cent in the North West Frontier Province (NWFP), 12 per cent in Sindh, and six per cent in Balochistan. According to experts on agriculture, the production of vegetables alone far exceeds its consumption annually. About 35 per cent of it is wasted as post-harvest loss. In such a situation, why the prices should jump 'through the roof', as they say, particularly in Ramzan every year is a sad reflection on the scheme of things. Precisely whoever is gaining the most through this form of extortion? Is it the farmer who is selling his produce on an exorbitant price, or the consumer who is creating an artificial demand by making unnecessary purchases during the holy month? Or, is it some kind of a 'middleman mafia' playing dirty with both the producer and the consumer? To start with, the poor farmers are not ready to take the blame. According to them, a greater part of the vegetables is perishable, and a grower cannot risk holding it back for a long time. The post-harvest handling and transportation charges badly affect his earnings. The situation worsens when the middlemen work their selfish machinations during an auction of the vegetable lot in the vegetable markets. Maqbool Khan Khichi, a progressive farmer from district Vehari, told TNS that he had sold hundreds of tomatoes against a mere Rs 62, because of the perishable nature of the commodity and the clever buying tactics of the middlemen in a vegetable market. "Being a farmer, I can produce vegetable but I can't market it," he said, adding that "99 per cent of the growers lacked marketing skills and they sold under compulsion time and again. "Similarly, we can't occupy our land for a long time and wait for prices to improve, as we have to replace the old crop with the next one immediately," he said, lamentingly. Ibrahim Mughal, President Agri Forum Pakistan, said that 80 per cent of potatoes (2 million approximately) are produced in Punjab, while district Okara produces 60 per cent of the total production in Punjab. Harvesting starts in December when a bag of 100 kg is priced at Rs 600. Price becomes Rs 500 per bag in February. The grower pays Rs 50 per 'gunny bag' in addition to the handling, loading and transportation charges up to the cold storage. From the cold storage, the price starts spiraling up, to the level of the vegetable market and the retail outlet; and each kilogram of potato is sold at Rs 25 in the market, though the grower, after the exclusion of all charges, gets Rs 4 per kg at source. Similar is the fate of all kinds of vegetables and fruits, and both the grower and the consumer are the worst affected at the hands of the middleman. As per the standard operating procedure, the growers are supposed to take their produce to the vegetable market through all possible means, bearing the everyday increasing petrol and diesel prices. In all vegetable markets, groups of middlemen -- buyers, hoarders, stockholders and investors -- behave like vultures and suck the growers' blood through all possible ways and means. As per market procedure, each bag of vegetable and fruit is offered by the growers/contractors for auction. Soon, a bag or a carton of vegetables is offered for auction. Groups of middlemen start with the minimum possible price and do not let the auction price cross a certain limit. They keep on calling proxies one after the other, and try to purchase vegetables and fruits in bulk at throwaway prices. The growers and their contractors cannot take the commodities back to the farms. Therefore, they have to compromise with the situation and sell them at any available price. Furthermore, no one is allowed to have a thorough examination of the bags and cartons of vegetables and fruits. Therefore, the growers and contractors can get away with fetching substandard vegetables and fruits to the market. The middlemen shift the burden to the consumers, adding to their own unimaginable profit margins. The poor consumer has to pay a high price for substandard fruits and vegetables. This phenomenon has become increasingly common in the last few years, and about 50 per cent of the fruits and vegetables that reach the market are either substandard or too raw. Yet, the retail outlets continue to sell them off at exorbitant prices, since they believe they have paid a high price to the middleman themselves. Looking back, one finds that the vegetable prices jumped drastically from the year 2003 onwards when the real estate mafia manipulated the heavy inflow of foreign exchange in the wake of 9/11, being sent in by the overseas Pakistanis dreading freezing of their savings. This heavy inflow of foreign exchange that made its way to the real estate prices skyrocketed overnight. Areas adjacent to major cities suddenly won importance, and investors were ready to pay millions of rupees for every inch of land. This suggested that the growers settled around the cities to offer their lands to the real estate mafia. According Hamid Malhi, member Farmers Associate Pakistan, a majority of growers settled in the outskirts of different cities prefer to cultivate vegetables in their lands in order to fulfil the needs of the city dwellers. But the offering of inconceivable prices by the real estate mafia forced these growers to sell off their lands. This led to a shortage of vegetables in cities, and the federal government had no option but to open the Wahga border for importing vegetables from India. But, this exercise proved futile, as the quality of Indian vegetables was not up to the mark. Similarly, the Punjab government came up with the concept of Agrimal to ensure infrastructure for a smooth and secure supply of fruits and vegetables from farm to the market. But, the absence of suitable circumstances has put the whole idea back to square one, and the growers' associations have demanded an inquiry into its affairs through National Accountability Bureaus.
-- Dr Ashfaque Hasan, Director General, Debt Office and Economic Adviser, Ministry of Finance, on price hike By Amna Yousaf The News on Sunday:
Government claims inflation has come down but prices of every Dr Ashfaque Hasan: The concept of inflation is highly misunderstood in this country. I have been trying to make people understand this difference for the last decade. Whenever it is said inflation has come down it is generally believed that prices will also come down. Inflation is basically the rate at which prices rise. So, if inflation is decreasing it does not mean prices will also decrease. TNS: What is the major reason of rise in inflation? DAH: Our inflation target for this fiscal year is 6.5 percent, and in the last two months, from July to August, of the current fiscal year the overall inflation rate was 6.4 percent. In this average, food inflation was 8.6 percent and non-food inflation was 4.9 percent. Even last year inflation rate ended on 7.8 percent largely because of food prices. So inflation is largely a food price driven entity and is not specific to Pakistan, it's a global phenomenon. At the moment global food inflation has increased by 42 percent. TNS: Does global inflation affect Pakistan as well? DAH: Pakistanis is not an island economy. The world is integrated, so if palm oil prices increase from $350 per tonne to $800 per tonne they will definitely affect cooking oil prices in Pakistan. TNS: Why price hike is at its peak in Ramzan every year? DAH: During every Ramzan there is an extra pressure on the prices of essential eatable goods because of the extraordinary demand created by increased consumption of perishable goods. Every other house is making fruit chaat on daily basis, which will have grapes, bananas and apples in it. This demand is not compatible viz a viz supply, therefore, pressure on the prices of such items also increases. TNS: What strategy has the government adopted to control price-hike? DAH: Here I would like to say two things, first if there are perishable items, you can't store them, and second it isn't possible for the government to keep huge stocks of onions, potatoes and other such commodities and sell them to people through utility stores during Ramzan at reasonable prices. Therefore, it is a temporary phenomenon and happens every year. TNS: You are a member of the price control committee formed at the federal level. What strategy have you devised to control the prices of major commodities like wheat, pulses etc? DAH: We have recommended controlling prices by buying and keeping reserves of crops, including pulses from farmers. With huge stocks at your disposal, you can dictate the market. We have started doing that for every commodity. We will keep strategic reserves with us so that whenever there is shortage we can intervene and release them. TNS: What does the government do for the benefit of a common man earning less than Rs. 5,000? DAH: The government has set a network of utility stores, mobile stores and Sasta Bazaars where goods can be bought at cheaper rates as compared to the open market rates. Earlier, there was a chain of only 450 to 500 utility stores but now there are 3400. By the end of this year, nearly 5000 stores will be set up at union council level to benefit people. TNS: But people still complaint about the availability and quality of the products on sale at these stores. DAH: With an increase in the number of utility stores their sales have also doubled. Criticism is inevitable because it is impossible to satisfy every citizen. It is impossible for any government. To verify the complaints against them I go and shop from these stores and I don't find any quality difference. TNS: The government claims it has given hefty raise in salaries to its employees. If salaries are increasing at a rate equal to the inflation rate why do people complain about price-hike? DAH: When salaries increase we expect the goods to be available at the same old rates which is against the principles of economics. When salaries increase we purchase more things which creates demand. This in return exerts pressure on prices. In the last 8 budgets, inflation has increased 7 times. Human needs are never satiated and this is a macro-economics theory. TNS: Does that mean the government is not accountable in any case whatsoever? DAH: No I am just stating the facts. I admit whatever mistakes the government has made and we shouldn't conceal them. But people also have some responsibilities to fulfil. If prices are increasing so is the consumption. Everybody complains but no one is ready to cut on consumption. TNS: What was the real cause behind wheat price-hike? DAH: It was mainly the untimely decision of the Federal Food and Agriculture Ministry to export wheat crop. We should have waited and watched the market before deciding. Wheat production this year was 23.5 million tonnes, the largest in Pakistan's history. This worried our agriculture minister, Sikander Bosan. He thought when this size of wheat crop will reach the market, prices will collapse and the farmers will suffer. So he suggested exporting 5,00,000 tonnes of wheat and the government granted the permission without delay. What followed was that the private sector, knowing there was wheat shortage in the world, also jumped in and purchased about 1.2 million tones of wheat from the farmers at much higher price. So approximately 3,85,000 tonnes of wheat were exported. In the meantime prices started increasing because the private sector as well as big landlords had hoarded more than one million tones for export purposes. The wheat which was to come in the market didn't come and pressure started mounting on prices in the market. TNS: What was done by the government to deal with such cases? DAH: The government immediately banned wheat export. Then in late August 2007, the Economic Coordination Committed (ECC) decided that the provincial governments should supply adequate quantity of wheat to flour mills from their respective stocks at much lower price. This resulted in significant decrease in wheat prices which are expected to further decrease. TNS: Why didn't the provincial governments release this wheat earlier? DAH: If they had released it earlier the crisis could have been avoided. I cannot talk on provincial governments' behalf but I would say that one reason could be that they feared flour mills in such case would themselves start smuggling it. TNS: Why no action was taken against people who hoarded wheat even at petrol pumps? DAH: Action was taken against them. A list of such hoarders was given to the provincial government so that it could take action against them. If we intervene into such matters then the issue pertaining to provincial autonomy will arise.
Whether it is through buying stocks & shares, or putting small amounts into committees, saving is the common man's only mantra for survival By Aziz Omar We all are familiar with
folk tales in which 'saving-up' would be the central theme. Animals It's now commonly observed all over the world, especially in developing countries, that women are more adept at budgeting and saving far into the future. Whereas men tend to think more towards increasing their present earnings to meet their growing needs. A similar mindset prevails for the Pakistani lot of housewives, businessmen, salaried workers and entrepreneurial women. Shabeer is a part of the family business of manufacturing grinding machines for the past 40 years. He indicates that although he is left with Rs 20,000 to 25,000 every month, instead of regularly pooling it together he re-invests it by buying more raw materials. Even though Nasir, who has a small unit for manufacturing medical equipment, is able to save around Rs 20,000 to 30,000 monthly, he invests it in more ways than one. "These days the situation in Pakistan is quite volatile and I can't rely on one form of saving. Hence, to diversify my portfolio, I re-invest some in my business, buy stocks and shares, and the rest I put into committees." For those who earn on a daily basis, such as small-time shop owners and labourers, saving can either be done at home or through buying up more inventories. Mohammed Hasan, who irons clothes for a living, saves around Rs 2,000 monthly. "I am currently putting money into two committees -- one for Rs 20,000 and one for 40,000. With the lump sum money, I intend to marry off two of my daughters." Rashid, who is a sweeper, is only able to scrimp about Rs 10 to Rs 20 a day and keeps his cash at home for ready availability. "I can't afford to have my money tied-up in any committee. It's not much already and unforeseen needs might arise for which I may even have to borrow from my relatives." Crossing the gender divide, we find that women are quite concerned for saving up for both long-term plans as well as for contingency ones. Zareena bibi, who manages a lamination business and a tandoor, is able to save around Rs 10,000 to 15,000 each month. "I am expecting to save up to around Rs 500,000 to 600,000 for my daughters' weddings as well as for renovating my house. Apart from my own savings, my husband and son also contribute and so I am putting money in a committee worth Rs 600,000 of 30-month duration." Banks as saving institutions don't seem to be quite popular among enterprising females. A case in point is Rubina bibi who has been doing embroidery with beads for the last 15 years. "With my four daughters working alongside me, as well as the income coming from my husband who is fruit seller, we are able to save Rs 6,000 to 7,000. However, I have closed the account I used to have in a bank as they are always deducting money for some reason or the other and I always end up having less than the amount I deposited." Rubina's concerns ring quite true in a majority of cases, as most banks have a penalty for the amount in an account falling below Rs 10,000. Rubina also feels that there should always be some cash lying around at home, around 3,000 in her case, for emergencies. "Committees for me have a distinct advantage as they force me to save regularly and so I give about Rs 1,500 monthly towards a Rs 60,000 one." But what about the ones amongst us who don't save and have a spending/shopping habit that they can't kick. Taimur works in an information technology related company and earns a reasonable five-figure salary. "I have a credit card and so I usually end up spending usually more than my monthly income. I am a gadget/techno freak and am always upgrading my computer with the latest graphics card or changing my cell phone for one which has more features and functionality." Taimur clarifies that although he does contribute towards his family's household expenses besides paying car loan installments, he is not the sole earning member and so doesn't have a lot of burden. "Yeah when I get married, I will have to consider saving/investment options such as stocks and bonds." To save or not to save just shouldn't be a question anymore. Even though globalisation, the reach of electronic media along with cross-cultural flow of ideas has led to a revamping of priorities, we have to keep ourselves grounded. Curtailing our wants and clearly identifying our needs should become the guiding principle towards a prosperous tomorrow.
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planners, the prices of everyday food items must shoot up -- every year
around this time, at the start of, and during, the holy month. The poor
consumer ends up paying through the nose -- literally.
adverse the working conditions may become," says Azhar Husain who works
as an office secretary in a local pharmaceutical company.
two-room servant quarter of some Railway official in Garhi Shahu, Lahore. Her
husband, Nazir Ahmad, works in a bakery and earns Rs 4000 per month while she
works in three houses in the surrounding localities and brings in Rs 4500 per
month, making the total income of the family to be Rs 8500. Shakeela's two
daughters also help her. Her family migrated from Peshawar to Lahore six
years back, in pursuit of better opportunities to earn and live. "In
Peshawar, my husband was earning just Rs 3000, while I was not allowed to
work, even though we were leading a very poor life. Now we are earning around
three times more."
tricks the 'middlemen' play -- absolutely 'unchecked' -- in collaboration
with the civil administration, right from the farm to the market.
Interestingly, the growers and the contractors have also learnt how to dodge
these middlemen -- basically by fetching substandard vegetables and fruit
into the market so that they can avoid huge losses during the auction of
their consignments.
other item are still increasing? What are the reasons for this?
have been doing it for millions of years. "Make hay while the sun
shines" and "save for a rainy day" are the typical proverbs
used to inculcate in us the saving ethic. Lately, with rising costs, shortage
of electricity and increasing consumerist tendencies in Pakistan's scenario,
all these symbolic social lessons have become quite pertinent.