Menace of hoarding
Courtesy:- Shaukat M Zafar
Pakistan was perhaps the only country in the world where food was plenty. Now it is facing a daunting challenge of unprecedented inflation and food shortage, making it a key concern for the policymakers, economists and market participants. Widespread hunger and malnutrition is now the reality of Pakistan. There is hardly a thing or commodity whose price has not gone up in the recent times. The price excesses are a threat to food security and thus one of the basic human rights. Highest ever inflation has slowed down growth to unsustainable level as it has eroded the purchasingpower of the middle class that is the main consumers to boost growth. Rise in prices has become a common feature in the country and the people are reconciled to this fact. The “food security” concept connotes literally obtaining sufficient calories and nutrients to stay alive. At this moment—after impact of rising food prices is felt—millions of people are already experiencing a food security crisis in the country. For the bulk of the Pakistani people, consumption levels are getting further squeezed day by day.
Nevertheless, the prices for other consumer goods and services, such as non basic food goods, clothes, toiletries, monthly rent, taxi prices, toys, books, stationary, and so on, go up on daily basis. People have been feeling the pinch recently as the price of everyday necessities. Commodity priceincreases have been much faster than wage hikes particularly in case of lower class fixed income people. For the last four years, people are pinning their hopes on the government to help them better manage their budgets by adopting policies that will drive down consumer prices, especially for basic necessities, but with no results. Contrarily, what is actually happening is that income and consumption growth is getting disproportionately concentrated within the top 10 to 15% of the population, who are actually benefiting from GDP growth. Opposition and media is silent on this vital issue due to vested interests, the inflation has alarmingly increased, the country is clearly a mess, life is hopeless, and the government has got to go. Yet is inflation really the big evil it’s made out to be? How much does it impact on the lives of Pakistanis? How much worse is it, really, under Musharraf, and what is the government trying to do about it and the food situation? Before [the Zardari-led coalition government] there was a greater variety of food available to the people on affordable price. Now we can not afford even the food we need, and there is no variety. Things got worse when the present regime implemented an IMF promoted “economic package” which caused massive increases in food, energy and petrol prices and transport costs. The blame lies with the neo-liberal policy framework of the PPP led coalition Government, which needs to be fought and reversed. Pakistan is passing through would be an uphill task for the future planners to reverse the destruction caused by the sitting PPP regime to the economy by massive borrowing. The ongoing bleak situation could be avoided had the government taken action against hoarders of food commodities that took the food inflation record high. People’s purchasing power has actually decreased significantly under the current government.
It is important to lay bare the real reasons behind the raging food inflation in Pakistan. There are various factors that contribute to this rise in prices. Some factors are unavoidable natural factors like unfavorable weather conditions which affect the food production and lead to the shortage of commodities in the market. The other is maximum appetite for profiteering. The immediate reason for the spurt in the prices of specific food items is of course hoarding. Trader cartels, encouraged by an inept Government, are mainly responsible for this. Assured of inaction, hoarders are creating artificial shortages and fleecing people from time to time. The Government has also manipulated trade policies to allow big traders to make huge profits through export and import of essential food items like wheat, sugar and cooking oil etc. Some speculators hoard the commodities, make a cartel, and a speculative bubble is formed, i.e. the commodities price increases because the hoarding causes supply shortages which is playing havoc with the livelihoods of the people. Our agriculture is in a crisis. We are not producing enough to meet the needs of a growing population.
Food prices have risen due to speculation, but it is extremely difficult to measure. Speculation means that many investors are putting money into commodities, creating a market that is likely to fluctuate – and remain in their control, skewing market forces. No doubt big business is one of the main causes of food problems and of inflation, by hoarding, underpaying, importing at the fixed exchange rate but pricing as if they had imported on the more expensive parallel rate, currency speculation, encouraging consumerism, supporting privatization, and so on. The growing penetration of big corporates in the food economy, international trade in food items and speculative futures trading in agricultural commodities has weakened the government’s capacity to control food prices. The share of corporate retail in food distribution has tripled over the past four years. The Government has manipulated trade policies to allow near and dear big traders to make huge profits through export and import of essential food items. Hoarders and speculators also get attracted to commodities as they are believed to move in an opposite direction to equity market. Inflation itself also leads to hoarding of goods as people get rid of cash before it is devalued, and start hoarding food and other commodities creating shortages and which in turn increases inflation even more.
Hoarding means storing essential commodities or withholding them in anticipation of rise in their prices. Sometimes, wealthy traders operating in themarket buy the entire quantity of items like Rice, Dals, Chillies etc. for example, and store it up with the object of selling it later at the time of scarcity todraw maximum profit out of it and to dictate the prices. The retailers in that case are left with no choice but to purchase the stuff concerned from the one who hoards, as he is the only one in the market that holds the entire stock of those essential items that other traders do not possess. He therefore dictates his own terms in the market and sells them at an exorbitantly high price to the retailer ultimately exploiting the needy people. This is an unjust practice highly condemned by Islam. The Prophet Muhammad (Peace Be Upon Him) is reported to have condemned the hoarders when he said: No one hoards but the traitors (i.e. the sinners). (Abu Da’ud, No. 2990) He (Peace Be Upon Him ) also said: The importer [of an essential commodity] into the town will be fed [by Allah], and the hoarder will have [Allah’s] curse upon him. (Ibn Majah, No: 2144)
In spite of being Muslim, quite contrary to clear teachings of Islam, the hoarders create an artificial shortage of certain commodities or products, especially the essential commodities by large scale hoarding. They release the hoarded commodities after escalation of the prices and make a highest neat margin over their investment in the hoarded commodities. The price of almost every agricultural commodity rose to a historic high over the past four years. In Pakistan, prices of main food staples like wheat, maize and rice are rising rapidly. Meat, vegetables, fruits, oils and ghee also experienced sharp hikes, with prices of butter and milk almost tippling. People are also more likely to consume than save, since the value of their savings decreases at the rate of inflation. Also, hoarding is both a cause and an effect of inflation, as people are likely to buy more than they need of a product to avoid the higher price later. Large investors are indulging in misuse of narrow commodity contracts as rules and regulations at present are not strict enough to stop such malpractices.
To keep the prices of essential commodities under control, and within reasonable limits, the Government should constitute the Committees who should monitor the prices and supplies of essential commodities regularly. The committees should not only monitor the prices of 12 essential commodities like wheat, rice, sugar, gram, cooking oil, vanaspati ghee, salt, tea, potatoes and onions on a daily and weekly basis, but also ensure the uninterrupted supply of the same. Curtailing the hoarding lobby which creates an artificial scarcity is of utmost importance. Any Increases in commodity prices will have to be monitored very, very closely. The Government should be stern on hoarders by giving the food grains seized in raids under the public distribution.
Pakistan was perhaps the only country in the world where food was plenty. Now it is facing a daunting challenge of unprecedented inflation and food shortage, making it a key concern for the policymakers, economists and market participants. Widespread hunger and malnutrition is now the reality of Pakistan. There is hardly a thing or commodity whose price has not gone up in the recent times. The price excesses are a threat to food security and thus one of the basic human rights. Highest ever inflation has slowed down growth to unsustainable level as it has eroded the purchasingpower of the middle class that is the main consumers to boost growth. Rise in prices has become a common feature in the country and the people are reconciled to this fact. The “food security” concept connotes literally obtaining sufficient calories and nutrients to stay alive. At this moment—after impact of rising food prices is felt—millions of people are already experiencing a food security crisis in the country. For the bulk of the Pakistani people, consumption levels are getting further squeezed day by day.
Nevertheless, the prices for other consumer goods and services, such as non basic food goods, clothes, toiletries, monthly rent, taxi prices, toys, books, stationary, and so on, go up on daily basis. People have been feeling the pinch recently as the price of everyday necessities. Commodity priceincreases have been much faster than wage hikes particularly in case of lower class fixed income people. For the last four years, people are pinning their hopes on the government to help them better manage their budgets by adopting policies that will drive down consumer prices, especially for basic necessities, but with no results. Contrarily, what is actually happening is that income and consumption growth is getting disproportionately concentrated within the top 10 to 15% of the population, who are actually benefiting from GDP growth. Opposition and media is silent on this vital issue due to vested interests, the inflation has alarmingly increased, the country is clearly a mess, life is hopeless, and the government has got to go. Yet is inflation really the big evil it’s made out to be? How much does it impact on the lives of Pakistanis? How much worse is it, really, under Musharraf, and what is the government trying to do about it and the food situation? Before [the Zardari-led coalition government] there was a greater variety of food available to the people on affordable price. Now we can not afford even the food we need, and there is no variety. Things got worse when the present regime implemented an IMF promoted “economic package” which caused massive increases in food, energy and petrol prices and transport costs. The blame lies with the neo-liberal policy framework of the PPP led coalition Government, which needs to be fought and reversed. Pakistan is passing through would be an uphill task for the future planners to reverse the destruction caused by the sitting PPP regime to the economy by massive borrowing. The ongoing bleak situation could be avoided had the government taken action against hoarders of food commodities that took the food inflation record high. People’s purchasing power has actually decreased significantly under the current government.
It is important to lay bare the real reasons behind the raging food inflation in Pakistan. There are various factors that contribute to this rise in prices. Some factors are unavoidable natural factors like unfavorable weather conditions which affect the food production and lead to the shortage of commodities in the market. The other is maximum appetite for profiteering. The immediate reason for the spurt in the prices of specific food items is of course hoarding. Trader cartels, encouraged by an inept Government, are mainly responsible for this. Assured of inaction, hoarders are creating artificial shortages and fleecing people from time to time. The Government has also manipulated trade policies to allow big traders to make huge profits through export and import of essential food items like wheat, sugar and cooking oil etc. Some speculators hoard the commodities, make a cartel, and a speculative bubble is formed, i.e. the commodities price increases because the hoarding causes supply shortages which is playing havoc with the livelihoods of the people. Our agriculture is in a crisis. We are not producing enough to meet the needs of a growing population.
Food prices have risen due to speculation, but it is extremely difficult to measure. Speculation means that many investors are putting money into commodities, creating a market that is likely to fluctuate – and remain in their control, skewing market forces. No doubt big business is one of the main causes of food problems and of inflation, by hoarding, underpaying, importing at the fixed exchange rate but pricing as if they had imported on the more expensive parallel rate, currency speculation, encouraging consumerism, supporting privatization, and so on. The growing penetration of big corporates in the food economy, international trade in food items and speculative futures trading in agricultural commodities has weakened the government’s capacity to control food prices. The share of corporate retail in food distribution has tripled over the past four years. The Government has manipulated trade policies to allow near and dear big traders to make huge profits through export and import of essential food items. Hoarders and speculators also get attracted to commodities as they are believed to move in an opposite direction to equity market. Inflation itself also leads to hoarding of goods as people get rid of cash before it is devalued, and start hoarding food and other commodities creating shortages and which in turn increases inflation even more.
Hoarding means storing essential commodities or withholding them in anticipation of rise in their prices. Sometimes, wealthy traders operating in themarket buy the entire quantity of items like Rice, Dals, Chillies etc. for example, and store it up with the object of selling it later at the time of scarcity todraw maximum profit out of it and to dictate the prices. The retailers in that case are left with no choice but to purchase the stuff concerned from the one who hoards, as he is the only one in the market that holds the entire stock of those essential items that other traders do not possess. He therefore dictates his own terms in the market and sells them at an exorbitantly high price to the retailer ultimately exploiting the needy people. This is an unjust practice highly condemned by Islam. The Prophet Muhammad (Peace Be Upon Him) is reported to have condemned the hoarders when he said: No one hoards but the traitors (i.e. the sinners). (Abu Da’ud, No. 2990) He (Peace Be Upon Him ) also said: The importer [of an essential commodity] into the town will be fed [by Allah], and the hoarder will have [Allah’s] curse upon him. (Ibn Majah, No: 2144)
In spite of being Muslim, quite contrary to clear teachings of Islam, the hoarders create an artificial shortage of certain commodities or products, especially the essential commodities by large scale hoarding. They release the hoarded commodities after escalation of the prices and make a highest neat margin over their investment in the hoarded commodities. The price of almost every agricultural commodity rose to a historic high over the past four years. In Pakistan, prices of main food staples like wheat, maize and rice are rising rapidly. Meat, vegetables, fruits, oils and ghee also experienced sharp hikes, with prices of butter and milk almost tippling. People are also more likely to consume than save, since the value of their savings decreases at the rate of inflation. Also, hoarding is both a cause and an effect of inflation, as people are likely to buy more than they need of a product to avoid the higher price later. Large investors are indulging in misuse of narrow commodity contracts as rules and regulations at present are not strict enough to stop such malpractices.
To keep the prices of essential commodities under control, and within reasonable limits, the Government should constitute the Committees who should monitor the prices and supplies of essential commodities regularly. The committees should not only monitor the prices of 12 essential commodities like wheat, rice, sugar, gram, cooking oil, vanaspati ghee, salt, tea, potatoes and onions on a daily and weekly basis, but also ensure the uninterrupted supply of the same. Curtailing the hoarding lobby which creates an artificial scarcity is of utmost importance. Any Increases in commodity prices will have to be monitored very, very closely. The Government should be stern on hoarders by giving the food grains seized in raids under the public distribution.
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