With political instability, market prices soarActivists and experts say that when elections approach, market monitoring gets lax as political parties want to collect donations for election funds. It will get worse as polls near, they say.
Baburam Rokka bought a bag of rice for Rs1,600 a month ago. When he went to buy another bag a few days ago, the price had gone up by Rs100.
Rokka, 42, a resident from Godavari, Lalitpur, said the prices of food items from rice to vegetables have been increasing every month but his income has remained stagnant.
“It has become harder to run a family with my income with the hike in food prices,” said Rokka, a school teacher.
While traders claim that food prices have gone up due to a hike in prices of raw materials in the international market, consumer rights activists say that political instability has fuelled the hike.
The political uncertainty with the dissolution of the House of Representatives by Prime Minister KP Sharma Oli and the announcement of elections on April 30 and May 10 has had a negative effect on the market with opportunist traders and middlemen taking advantage of the situation hiking prices on daily consumable food items suddenly, hurting the consumer who has already been financially hit by the pandemic, activists and officials say.
“Prices of daily consumables have increased by 12-15 percent within one and half months right after the government dissolved the House and announced elections,” said Madhav Timilsina, president of Consumer Rights Investigation Forum. “Past experience shows that prices of food items generally increase during election time with opportunist traders becoming more active in the market.”
With ineffective market monitoring by authorities as well as hike in prices of raw material prices in the international market, food as well as non-food items and their quality have been unstable and uncontrolled in the past few years with a rise in a number of market anomalies, but with political instability, food prices have swelled nationwide, said consumer right activists.
“Prices would not have gone up this much if there were no political instability,” Timilsina said.
While prices of raw material have certainly increased in the international market, prices in the domestic market have risen at a higher proportion and traders have also been taking advantage, according to Timilsina.
Prices of materials to make sunflower oil, for example, have increased from $750 to $1,000 per ton but traders have hiked the prices of even stocked goods, he said.
According to Raj Kumar Shrestha, president of Retailers Association of Nepal, the prices of sunflower and soybean edible oil have increased by Rs30 per litre after mid-January.
Prices of food grains like rice, lentils and legumes, flour, meat and poultry products have also gone up in recent weeks.
“The price of rice has been artificially hiked by up to Rs200 per bag with traders saying that demand for rice in India has increased with its export to Bangladesh,” Timilsina said.
If there had been government interference in the market prior to the price hike, then the price would not have increased this much, he added. “There is enough stock of sugar in the market with domestic production and import but it still costs Rs80 to Rs85 per kg.”
Chicken is priced at Rs400 to Rs410 per kg from Rs320 a month ago while a crate of 30 eggs costs Rs440 up from Rs 380-390 a month ago. The price of mutton has also increased by Rs50 per kg.
Poultry entrepreneurs said that the price has increased due to low production with increased demand as offices, schools, colleges, party palaces, restaurants are reopening.
Timilsina, however, blamed the government for not making its strong presence in the market to control the price.
“The government should come up with a strong market inspection mechanism in a situation like this but the inspection is the same as during normal time,” he said.
The import of food items has been rising but according to traders, consumption has slowed down yet the month-on-month price is increasing with frequent price hikes.
The Department of Customs data shows that there is enough supply with an import bill of agricultural and food items of more than Rs100 billion in the first six months of the current fiscal year.
“This shows that the market is uncontrolled,” Timilsina said.
This is a view shared by officials.
An official at the central bank, who spoke with the Post on condition of anonymity, admitted there are high chances of artificial price hike, carteling, black marketing and foul play in the market with imminent elections.
“The government gets focused on the election and becomes lenient in taking action against traders and manufacturers involved in malpractices as it seeks donations for election funds,” the official said.
According to Nepal Rastra Bank, the prices of fruits, ghee and oil, vegetables, lentils and legumes have increased by 14.75 percent, 13.01 percent, 11.44 percent, 10.74 percent between mid-November and mid-December (in the Nepali month of Mangshir) in current fiscal year compared to the same month last fiscal year, 2019-20.
But wholesale and retail traders have a different view.
Shrestha of Nepal Retailers Association said that the prices would not have gone up if the imported food items were consumed in the domestic market and not exported to other countries.
“When traders get higher prices by exporting compared to selling it in the domestic market, they export the food items to India to profit more,” he said. “Hike in prices of edible oil, and dried beans are an example of this.”
The free trade privileges given to the least developed countries are being misutilised by the traders, as retailers claim that traders have been importing green and white dried beans and edible oil and exporting it to India.
“But having said that, the political situation always has an effect on the price fluctuation specially at times of announcement for elections,” Shrestha said.
Meanwhile, the Department of Commerce, Supplies and Consumer Protection has claimed that it has increased market inspections and has been slapping fines on traders if found creating artificial price hike.
“Complaints of the price hike on food items have increased in recent times and the department is addressing it and taking action,” said Shiva Raj Sedai, director at the department. “We only look at whether the price is artificial or natural. We talked with traders and manufacturers for the reason behind the hike in food items prices and they said that the prices of imported goods have increased from origin.”
Economist Jagdish Chandra Pokharel feels that a sharp hike in basic food price will have more impact on lower income people—daily wage earners and informally employed people.
“The government should address the hike in food prices seriously as it has increased much and should stabilise prices,” Pokharel told the Post. “Inflation has not been much overall but if we break it down, prices for basic food items have increased disproportionately.”
So far, observing the share market and other commodity markets, the recent political atmosphere does not seem to have impacted them so much, he added.
Pokharel viewed that the impact of elections on the market will be even more from next month.
“Once the election procedure begins, its impact will be felt after that,” Pokhrel said.