By Aamir Hakeem
The price control has always remained a complex phenomenon both in developed and developing economies. Supporters of free economies argue that market mechanism determines the price level on the basis of demand and supply. Chronic shortages and surpluses can be avoided by following this rule as demand and prices direct production. The economic consequence of government price control is economic disruption and price control is a form of public theft too.
But the countries, which advocate that market mechanism should determine the prices by itself, have well documented economic systems. The consumers are well educated and understand their rights; strong consumer’s associations are there to protect their rights both with respect to quality and the price of goods. Competition among businesses benefits consumers and producers but when choices are limited then liberalisation leads to monopolies and lower prices are denied.
Consumers International, the global federation of consumer’s associations, undertook a study of competition in seven developing countries including Pakistan; the problem of resources was cited as a major factor in the failure of competition regimes to act effectively. Another major issue identified was the lack of strong consumer protection legislation. Good consumer policy not only helps the consumers but also benefit companies. Without strong consumer policy, active participation of civil society groups and without ample political will to put competition regimes in place and support their work, consumers will suffer.
Consumerism is a social movement for defending the rights of consumers. Consumer associations are non-profit civil entities, which are not subject to pressure groups. They work for their associates and provide services of informing, advising and legal defence both on an individual and group basis and also conduct specialised publications and studies.
Internationally, consumer organisations play vital role to ensure community protection that set basic standards such as for the safety of products like electrical appliances, for microbiological contamination in food, safety requirement for the prescription of drugs and assurance of laws to make markets competitive vis-‡-vis quality and reliability of goods.
In Pakistan, at present there is no control over the high prices being charged by the traders and manufacturers with respect to the purchasing power of the poor sections of the society. The prices of goods of common use and edible items like, oil and ghee, sugar, various drinks, toiletries, garments, pharmaceuticals, washing machines, refrigerators and motorcycles etc need to be scrutinised and controlled. On the other hand the raw materials such as PET resin, caustic soda, formic acid, soda ash, PVC and stearic acid are over priced due to the higher tariff protection and other reasons.
Over the last couple of years the government has considerably reduced the customs duty on imported raw materials and also most of the raw material is being imported from China at highly competitive prices. Yet no reduction in the domestic prices has been witnessed nor have the benefits of the reduction in the import duties been passed on to the consumers.
United Nations also provides guidelines for comprehensive legislation and substantial implementation institutions as an international commitment to consumer rights. The most important of these are the right to be able to access the means to meet basic needs and protection of the economic interests of the consumers.
UN recommends governments to develop and maintain consumer protection policy providing the freedom to form consumer and other relevant groups and organisations, and the opportunity of such organisations to present their views in decision-making process. It is also advised to maintain policies to ensure the efficient distribution of goods and services to consumers particularly where the distribution is endangered like in distant rural areas. Food security for all, quality of pharmaceuticals and consumer education is emphasised.
Local org which are working in this field, conducted detailed studies with some recommendations to the government to control the price hike. A new authority is also demanded to prescribe normal rate of profit through a check and balance system as reduction in cost inputs due to reduction in import prices must trickledown to the consumers. Though consumer associations are not a pressure group but the progress of developed countries witnesses that governments always appreciated the participation of the non-governmental sector for legislation, implementation and education to achieve sustainable economy.
Consumer Price Index (CPI) is a measure of the average change in prices over time of goods and services purchased by households. In Pakistan, Federal Bureau of Statistics maintains and releases rates periodically. CPI is generally considered as the main indicator of inflation. According to the data released by the Federal Bureau of Statistics, CPI rose 0.78 per cent in May, following a 0.96 per cent increase in April.
Media of developed countries regularly monitors these figures for the sake of their consumers. In USA, Washington Post along with other dailies cried out on its front page over a 0.6 per cent rise in CPI in the month of May compared to the preceding month’s rise 0.2 per cent. This rise was estimated the highest rise in the last three years and was regarded as a burden on the pockets of the consumers in a country where employment opportunities and social security is assured.
The developing countries like Pakistan, where the consumers are already deprived of basic necessities of life due to over profiting and mismanagement, no effective hue and cry can be witnessed in media and corridors of power, based upon these indices, and no meaningful efforts are being employed to control the prices.
If the price hikes are due to over profiting then, which governmental departments are responsible for that matter? Over profiting in some of the groceries is obvious, where middleman and stockiest play both with growers and consumers. Moreover, if motorcycles are being exported to Bangladesh with a profit at almost half the price compared to the domestic market then why domestic consumer cannot be given relief? In Pakistan, determination of prices cannot be left alone on market mechanism based on the rule of demand and supply until minimum per capita income, implementation of monopoly control regulations and healthy competitive environment is ensured.