Provinces and prices

Prices faced by the lowest income quintile in the first quarter of FY21 are mind-boggling. The Sensitive Price Indicator (SPI) has jumped from 2.5% in FY19 to 12.5%. Prices make news and politicians in government want to be seen to be doing something. As higher living cost affects directly a huge majority of voters, the political opposition is quick in seizing upon this opportunity to highlight official apathy. Strangely though, both sides of the aisle seem to locate the responsibility in the federal government. The tendency, rooted in our undying love for a strong Centre, persists even after the 18^th Amendment. The provinces conveniently look the other way when it comes to the misbehaving prices. In contrast, the federal government is too eager to enter territory it does not control, despite lamenting its reduced share in the resource envelope. Prices are the first item on the agenda of the cabinet and the ECC. A panicking federal government has constituted a National Price Monitoring Committee led by the finance ministry. The last meeting held on the directions of the PM’s office discussed “the abnormal variation in the prices of perishable items such as tomatoes, potatoes, onions as well as other essential items like wheat, sugar and chicken”.

Now the federal government has nothing whatsoever to do with the production and distribution of these items. Its only role is in enhancing supply through import, but what, when and how much to import again requires action on the provincial end. The reason for increase, identified in the meeting, the widening wholesale-retail gap, and vigilance prescribed for district administration, do not require federal indulgence. The federal government can do no more than what the Information Minister did: Blame it on the opposition. In the Cabinet meeting on Tuesday last, many ministers are reported to have raised concerns about galloping prices of flour and sugar. The PM directed the formulation of “a strategy to bring down the prices to provide relief to the masses”. The next moment, the cabinet decided to raise prices that it does control i.e. utilities.

One rarely hears such noises in provincial cabinets or assemblies, leading the CMs to direct timely action. The last month was an exception when legislators from the government as well as the opposition benches in Punjab Assembly debated rising prices and came out with the suggestion of a parliamentary committee on watching prices. While inflation is an overall responsibility of macroeconomic decision-makers dealing with fiscal and monetary policies to manage aggregate demand, the supply side causes of specific price escalation are best handled at the microeconomic level. Of the 51 items in the SPI, only five are in the federal domain. Every week, the Pakistan Bureau of Statistics collects information from 50 markets in 17 cities. All major cities in the provinces are covered. Why can’t the provincial bureaus of statistics access the SPI data pertaining to their respective cities? Why can’t provincial planning departments prepare summaries based on this information? And why can’t these summaries become the first, regular agenda item for the provincial cabinet meetings? For most items of common consumption, these cabinets have the necessary economic powers and the administrative machinery to plan smooth supply chains, and overcome any disruptions signaled by the price data.

Last but not the least, the Fourth Estate must also realise that when it comes to prices, their guns may be pointed in the wrong direction. Likewise for federal ministers challenging a clueless food security ministry on the demand-supply data of wheat at this week’s ECC.

Published in The Express Tribune, October 9^th, 2020.

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