Touria Prayag's Blog

L’express Weekly, 18 March 2011

Posted in Uncategorized by touriaprayag on March 18, 2011

Pdf weekly 18march


Price rises and consumer woes

Mauritian households are being severely hit by the spiralling cost of living as basic food prices skyrocket to all-time records and there seems to be no end to it. Hundreds of essential items on supermarket shelves sting before you even touch them. And you cannot afford not to touch them. The runaway price of petrol, an unavoidable input in the logistical chain, compounds the food inflation conundrum.

It would be unfair to blame the price rises squarely and simply on Pravind Jugnauth and his budget. The measures he effected have arguably little to do with how deep we have to dig in our threadbare pockets today to be able to have a decent meal.

Natural calamities, the diversion of cereals to the production of bio-fuels, the civil unrest in large parts of North Africa and the Middle East, are some of the reasons which account for the food and oil crises the world is going through. The fact that we have remained heavily dependent on importation for our food needs and the hedging blunders committed by our infamous luminaries have not helped. But they tell only a tiny fraction of the story.

The opposition seized the opportunity to jump at Pravind Jugnauth’s throat. And that is understandable. They are just doing the job we pay them for. But the fact of the matter is that the critics have not put forward alternative solutions. And if truth be told, there aren’t any. Or at least there are no quick fixes to these exogenous shocks.

Shakawtally Soodun and Michael Sik Yuen have come up with some ideas. They have to be seen to be doing something. And one may argue that something is better than nothing. Soodun has made an appeal to importers’ patriotism and urged them to reduce their prices and the effect was immediate: many items of basic necessity have gone down by a few rupees. Shoppers will soon find out, however, that their relief will be short-lived. Importers will not fill their coffers with patriotism. They will soon either creepingly revert to the old prices or, worse, resort to the now well-known common practice of downsizing. In other words, to pass the rising costs on to the consumer, many firms will maintain the sticker price of the product but reduce the quantity sold. This subterfuge has proved not to turn off the average consumer. It has been established that there is a greater sensitivity in consumer markets to price rather than quantity up to a certain extent. Consumer associations therefore have to be very vigilant and ensure that the patriotic drop in the importers’ and retailers’ margins is not merely cosmetic.

The Observatory of Prices proposed by Sik Yuen has not drawn great enthusiasm largely because it is thought that it will not bring down prices. And as it happens, it won’t. It would, however, be wrong not to encourage it. Its effects in the short-term are negligible. In the long term, though, it will provide invaluable data about price evolution and whether it is consistent with world tendencies. It will also be easier to identify cases of profiteering, monopoly abuse, cartels or collusion.

In the food price inflation issue, we have to come to terms with one thing: we are in it for the long haul. We have to think in terms of sustainable palliatives, such as optimum use of arable land for local production and food security. In the meantime, we have to pez nene boire de l’huil. Except that oil too has become unaffordable.


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