March 12, 2014

Rising Prices And The Common Man

Essay : [Rising Prices And The Common Man]

English Essay on "Rising Prices And The Common Man"

Rising Prices And The Common Man

Though rising prices is not a new phenomenon, yet the common man tends to compare the current prices with those prevailing during the past few years. Prices have substantially increased since 1995, and have shown an upward trend, especially after the Budget and hikes in administered prices. It is now very difficult for people depend on regular monthly income to make both ends meet. We all feel that something should be done to check the prices.

There is a lot of anger, resentment and discontentment over the rising prices, and most people seem to link that the government has been totally ineffective in checking the prices. However, the controlling price rise is not an easy task, it require special product, by product and industry, by industry analysis. The price issue involves everybody .at present. Though the government claims to be doing whatever it can, the situation is now under check. The middle class is the worst affected by the price hike. The industry and the trade are responsible to a good extent for not playing fair with the public. The government, businessmen and the public should collectively tackle the problem, back in theory and practice.

New price lists put up by pharmaceutical firms show an average increase of over 32 percent, including a five percent GST, in the prices of five controlled medicines. The hike comes in the wake of reports last month that drug companies may be allowed a raise of 12 percent in the prices of decontrolled medicines and six percent for controlled or essential category of drugs. The latest increase, which came into effect from September 96, is said to have been with the approval of the health ministry allowing the pharmaceutical can arms another round of price adjustments in both• controlled and decontrolled categories that seems disproportionately high.( This is probably the third increase in the last eight months which has made drug prices in Pakistan among the highest in the region. Admittedly, budgetary measures which include, besides the GST, additional import duty of five per cent on pharmaceutical raw material and, 10 percent customs duty and five percent sales tax an import of finished products, provided a plausible ground for the manufactures and trades to wound pressure for an upward revision offices, The slide in the value of the rupee vis-a-vis the US dollar also affects prices because most raw materials and finished products are imported. It is, however, the arbitrary and disproportionate increase that are usually made on the plea of cost inflation which remain the bane of the pharmaceutical sector. And over and our again the government has proved virtually helpless in face of unauthorized and at times excessive increases which have placed' a heavy burden on the average consumer. The authorities have been failed to effectivel check artificial scarcities aimed at pushing up prices. As in the past, the latest hike has also been accompanied by similar unethical practices.

The need is imperative to protect the people's interests against frequent price hikes as a corollary to the policy of partial deregulation of drug prices introduced in 1993,. There have been reports suggesting that drug manufactures have been trying to get many essential drugs off the price regulations list. Even otherwise there has been a reported increase of 80 points in the drug price index over the last three years as compared to the consumer price index which has registered a rise of 36 points during the same period. Recent studies have also revealed 'that multinational companies have been reaping more profits by selling fever medicines than before at higher prices of particular concern is the disclosure that prices of life saving medicines have registered a 112 percent since 1993. Evidently, in such an environment, leaving essential medicines to market forces alone to determine prices would be fraught with grave risks to public health in a country with inadequate health services and limited purchasing power of the people. At the heart of the problem is, the flamed policy of allowing' multinationals to buy raw materials from their principals in other countries, at a high premium and sell the finished products locally at inflated rates. It is also said that multinational pharmaceutical companies operating in both India and Pakistan are selling their products at prices up to eight times, cheaper in neighboring India as compared to Pakistan. There are complex issues and yet it should be possible to devise a price control mechanism whereby such wide discrepancies can be avoided and prices can be maintained at a reasonable level. Steps must also be taken to keep cost-inflating factors relevant to pharmaceutical production under proper check and scrutiny,

Sugar is at present selling at over Rs. 20 per Kg and the farmer compares the prices of crop with the prevailing sugar price and expects a corresponding reward for his investment and labor. Finding no way out of the stalemate. Punjab's 38 sugar mills are said to be vying each other, although in a limited way, to lift the cane from the field at Rs 32 -37 per 40 Kg. Still resistance of the farmers continues an on expectation of getting a price equal to last years. Most industries based on indigenous raw material, like textile and sugar, have become used to making profits through efficiency of their operations but through depressed prices of raw material. Expansion of these industries took place in recent years on an expectation that the situation would last indefinitely and the investment was mostly in the form of bank loans with sponsor's risk being minimal. Now that price control, are no more there and the economy has been largely deregulated, a new equilibrium in prices and between the producers of raw materials and the manufactures will have to work itself out. The government's support price system has no relevance in the present context.( It has' totally broken down in case of cotton and sugarcane and hardly works in other cases. In fact, it causes conflict, hinders free play of market forces, and finally gives away to these after much waste of time and efforts. The reason why this happens is that support prices are fixed without any exercise in cost calculation and taking demand situation into consideration. The government has absolutely no system of cost assessment. In view of the fact that agricultural production is proved to violent fluctuations caused by natural as well as human factors, a regulatory price mechanism for the agricultural sector is desirable. But this mechanism needs to be realistically devised. The government must not remain unconcerned with the present dispute between the farmers and the crushes. Each day's delay is casting scarce foreign exchange as sugar is being imported while the crop is mature and a sizable part of the crushing capacity remains idle. The interests of the growers arid the crushers must the reconciled and the greed and rapacity 'of both restrained.

While Pakistan continues to import sugar in a situation of acute balance of payments crisis, former have a mature crop" supposedly a bumper one, and the mills are crushing cane at about 10 percent of their capacity. The crushing season starts from October and much time available to settle the dispute between the farmers and the crushers. Despite the' fact that, the prospects of the crop and good, the crisis is deepening, the reason being the disagreement between the growers and the crushers on the issues of the price of the cane. The government has fixed the support price at Rs. 24 per 40 Kg. The growers say it does not meet their cost of production. Last year finally to relent and pay up to Rs. 40 45, per 40 Kgs but the consequence of the delay was that there was a production short fall of about 400,000 tons of sugar. It is a repeat situation that the growers are now demanding last year's price.

Financial position of the cane growers has generally improved in recent years; their holding capacity in a situation of disputes with the traders and crushes has also increased. In certain districts of Punjab farmers have got organized, which has given then added bargaining strength. The Punjab Kissan Board is helping growers take on sugar mills in an organized manner. They are not under pressure to sell at a price which they think is not remunerative enough. A profitable alternative in the form of gur-making is also available, and Afghanistan and the NWFP constitute a large and ready market for the product.

Gas prices have been increased thrice in six-.weeks. Government is likely to approve 15-25 percent raise in the prices -of natural gas for domestic, commercial and industrial consumption. Such an increase will immediately raise the cost of electricity generation and fertilizer production, The prices of the two sources of energy -gas and electricity will automatically affect the while range of economic activity and inflationary trend will get a bin boost, making the life of the common people more miserable. The government says that the price increase was being affected on the demand of IMF. In the government aware that gas price increase will have an immediate implicit directly and through higher prices electricity on the cost of production of almost all' agricultural and industrial products and services?

What baffles one is IMF's as well as government insistence on bringing the price of Pakistani gas at per with international prices. Neither land, nor royalty, nor labor which are impartment components of cast, is internationally priced here. Precisely for this reason, in countries where gas and petroleum are produced, a price differential is maintained between domestic and export prices. One factor that government has mentioned as causing losses to the gas companies is excess recruitment. This overstuffing was said to have been due to the considerations of keeping the tribal sardars, in whose areas gas deposits were located, pacified. If the information is correct, this practice must be discontinued forthwith. It is for the first time that the people are being told that the gas companies are running in losses. Until recently these were being considered as blue chip, companies and gold mines for purpose of privatization.

If the contemplated price increased is required for mobilization of conditional funds for prospecting and exploration and for the development of discovered gas fields, the government should say so and let the people know about the resources collected specifically for this purpose. If this is not done, the obvious presumption will be that the increase is being affected to bring the budget deficit down to the IMF prescribed target of 4 percent of GDP.

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