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Managing soaring food prices

By:PURUSHOTTAM OJHA
Date: Wed,09 Sep 2009
Submitter:Admin
Views:3712

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The world is currently reeling under four-F crisis, a catastrophe of melting financial market, food insufficiency, low fuel price and the spread of flu that is engulfing the developed as well as the developing world. The decline in the price of crude oil in recent months had given some level of comfort to the developing world but the price is once again going up. This is again affecting the least developed and developing world as it is taking a toll on the economy with prices of consumer goods going up. It’s only a matter of time before Nepal also increases its oil prices.

Prices of basic foods are rising steeply in the world market. Some of the least developed countries like Bangladesh and Haiti have witnessed riots because of food shortages. Food price inflation has pushed up the family’s weekly shopping bill by 15 percent in a year. In the Asia and Pacific, where about 600 million people live on US$1 a day or less, it has put a big question mark on the people’s ability to survive. According to the Asian Development Outlook (ADO) 2008, released by Asian Development Bank, Manila, food accounts for 59 percent of the consumption basket in Bangladesh, 57 percent in India, 55 percent in the Philippines and 40 percent in China. In Nepal, food constitutes about 80 percent of the consumption basket of the family and it is obvious that rising food prices is having a negative impact on household income and savings.

Food security has surfaced as a major development challenge in recent months. The sharp rise in global food prices and domestic crop losses due to long drought spells led to a surge in domestic food prices. Owing to high prices of some food items, and of fuel and transport, year-on-year inflation in mid-January 2009 remained high at 14.4 percent. This reflected supply constraints caused particularly by high transportation costs, increment in the minimum wage and civil service salaries, deteriorating industrial relations and deepening power crisis. The market prices of cereals and edible oils have gone up by 50 percent while the prices of fresh vegetables and fruits has shot up by 200 to 300 percent, making the life of fixed income groups more difficult and vulnerable.

A recent survey conducted by the Department of Commerce reveals that the reasons for increasing food prices is mainly due to a decrease in the production of major crops (34 percent), increase in demand of food (16 percent), rise in international prices (11 percent), surge in transportation costs (9 percent) and disturbances in the supply system due to strikes and disruption of transportation system (4 percent). The demand side of the economy continues to be driven by private consumption, fueled by workers’ remittances and the increased liquidity in the market due to implementation of various populist programs by the government while the supply side is constrained by decreased production, ban on export of food grains from the other side of the border. Nepal maintains close trade ties and receives most of the deficit food grains from India and hence restriction on export of food grains from India has a direct bearing on supply of these commodities in our domestic market. Inflation in Nepal in some way goes hand in hand with inflation in India as the currency peg and open border for movement of goods and services contribute to maintaining such linkages.

The deficit on the production of major crops, including wheat and lentils, due to the drought of last winter and the problem of planting rice at the right time due to the late arrival of monsoon this summer is likely to compound the problem of food shortages. What it means is that the response from the government must be multi-dimensional in order to meet the shortages and rescue the common people from burgeoning food crisis. The ban on export of some essential commodities, including wheat and rice, has to be lifted in order to ensure that a large chunk of people would not suffer from hunger. Additional food supplement has to be made by importing the deficit quantity from India or third countries. Besides, the government needs to embark upon facilitation and assistance to the farmers in growing quick-yielding varieties and crops like potato, wheat and beans that could supplement the food requirements. Subsidy for small irrigation schemes, deep and shallow tube wells and agro-chemicals would help farmers to get a good harvest of the other crops that are yet to be planted.

Supply of food grains in the far-flung remote areas is a nightmare due to lack of transportation facility in these areas. The scattered settlements along the rough terrain make it difficult to supplement food grains from outside. This requires maintaining the sufficient buffer stock in the district headquarters by Nepal Food Corporation in order to cater to people’s need during emergency. The food available under the Food for Work Program of WFP has to be distributed equitably so that districts reeling from food deficit get their fair share. There is also a need for a well-organized program and proper coordination at the centre as well as in the districts between the Ministry of Supplies, Ministry of Agriculture and the World Food Program.

The program of supplying subsidized food grains in the remote hill and mountain areas by the government started during the Panchayat era as a quick-fix resort to address food shortages encountered by the people but over time it has become a permanent mechanism. The political leaders then onwards have sought the support of local people during elections by pledging to provide more food grains from outside once they get elected. This has discouraged the initiatives of growing potential food grains in their farm and has increased outside dependency. The long-term solution for mitigating food deficiency in the remote areas has to be chalked out through proper planning and a concerted approach by the related ministries. Support for minor irrigation, agriculture inputs in the form of seeds, pesticides, fertilizers to the local farmers, crop diversification and increased focus on fruits, vegetables, meat and milk production are some of the important initiatives that can be taken for supplementing and sustaining food supply in such areas.

The unprecedented rise in the price of food grains needs immediate response that, among others, may require price monitoring of essential commodities, transparent pricing mechanism, mandatory display of price list by retailers and wholesalers, effective monitoring of the market and periodic review of fiscal and monitoring policies. The current practice of paralyzing the overall transport system to put pressure on the government to accommodate all kinds of unjustified demands should be immediately stopped. Besides, syndicate in transport and cartels by crook traders should be dealt with seriously in order to control prices of all essential goods and to make the life of common people easier.
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