Costs are rising, what to do now – a middle class dilemma


“Sugar is Tk90 [per kg], condensed milk 80 Tk, gas bottle 1,400 Tk. How can we still sell a cup of tea for Tk5?”

It was an angry outburst from Rana, who operates a roadside tea stall in Eskaton in the city. Prices for all tea inputs have jumped, but he is struggling to pass the increases on to his customers – mostly daily wage earners, such as rickshaw pullers.

Rana’s sister Jasmine who owns the stall seems to have sympathy for regular customers and has raised the price by just Tk2 for a cup.

“Where will they get the money to give more Tk2 for tea? If the rickshaw pullers ask for extra, people are ready to fight them.”

The diminutive businesswoman, who runs her family of six on income from this tea stall, says her monthly grocery bills have topped Tk7,000 this month, up from an average of Tk5,500 earlier .

“The price of gas cylinders has gone up. Now I heard the home gas bill will be Tk 2,400,” she says, worrying about rising business costs and household expenses .

Small businesses like his have not benefited from the stimulus packages, interest rate caps or tax breaks offered by the government to pull the private sector out of the hiccups of the pandemic.

Households are also not protected from soaring prices of basic products such as sugar and edible oils. After a rise in fuel oil and bottled gas prices, new proposals to increase gas and water rates loom as an additional worry, as already heated cooking and grocery markets extend the queues of the “new poor” in front of trucks selling essential goods at subsidized rates on street corners.

Employees, even in the private sector, are not immune to price shocks.

A well-paid pharmaceutical company executive struggles to compare official per capita income growth statistics with his own income increase. “Statistics may be true, but they don’t apply to 90% of people. I just see new worries come into my life every other day,” he groaned, giving examples of how Her family of four’s grocery bills have skyrocketed. of Tk 5,000 in January and why he has to reduce his taste for cauliflower or bottle gourd to control his spending.

Rising water and gas prices will mean an immediate appeal from the landlord asking for a rent increase on the house, he adds.

A report by the Trading Corporation of Bangladesh (TCB) revealed that the prices of rice, flour, edible oil, lentils, pulses, onion, garlic, turmeric, flour, milk, sugar, salt, eggs and other basic necessities have increased considerably.

Premium rice sold at 60-68 TK in Dhaka on Thursday, down from 58-62 TK on the same day a year earlier.

The price of lentils increased by 44.44%, onions by 100%, sugar by 14%.

The price of eggs, the cheapest source of animal protein for low-income people, increased by 24% to 35-37 TK for a hali or four pieces.

Employees’ incomes do not increase in a manner comparable to the rise in commodity prices, according to the BBS. Even the rate of inflation has exceeded wage increases in some sectors.

The economy faced 6.05% inflation in December, when the wage rate index rose 6.11%, just 0.06 percentage points higher than the CPI rate .

While the increase in wages is less than the increase in commodity prices, the purchasing power or real income of millions of workers in different sectors, from fishing to industries to construction, has fallen.

Rising daily living costs, however, have not prevented regulators from worrying about the consumer price index, with inflation jumping to 6.05% in December. Bangladesh’s per capita income rose to $2,591 in the last fiscal year from a previously estimated $2,554, the official statistics agency said in its final estimate.

Stating that per capita income has increased by 11% according to government calculations, Professor Mustafizur Rahman, a senior fellow at the Center for Policy Dialogue, told The Business Standard that the reality is that the income of the poor has increased slightly and even many of them suffered. loss of income.

To earn $2,591, the income of a family of four must be more than Tk 73,000 per month. He wondered how many families could do this? The sad reality is that the purchasing power of the poor has been reduced due to severe income inequality, he noted.

The long queues in front of TCB trucks to buy low-priced goods show how much trouble the poor and middle classes have, Mustafizur said, adding that to keep their purchasing power intact, growth economy must be made more distributive.

Moving away from reliance on VAT, the government should focus on direct taxes, such as income tax, wealth tax and inheritance tax to increase revenue collection, a added the economist.

“There is a big difference in price between our level of import or production and the level of consumption. Those responsible for monopoly and market manipulation must be brought to justice,” he continued.

Due to restrictions on gas pipeline connections to households, city dwellers are now increasingly dependent on gas cylinders, the price of which was increased from Tk 62 this month to Tk 1,178 for a 12 cylinder. kg.

State-owned gas companies have offered to increase retail tariffs to around 100% to offset high import costs, which will bring cooking gas by pipeline to over Tk 2,000 per month from Tk 985 for a two-burner stove.

And, the public water monopoly has also chosen this time to propose a 38% increase in the water tariff, from 15.18 Tk to 20.94 Tk per unit (1,000 liters), which will increase the monthly water bill from Tk 770 to Tk 1,070. for an average household in Dhaka city.

Dhaka Wasa provides about 80% of water pumping from underground aquifers and the rest of river water treatment. What the public agency needs is electricity or fuel oil to operate its pumps and supply its supply network.

As soaring fuel prices have been a global concern for a few years now, countries – from India to Italy – have taken steps to ease the burden on people, hard pressed by the erosion of incomes induced by the pandemic, because energy prices are associated with costs of almost everything related to daily needs for goods and services.

But in Bangladesh, the blame shifted directly to consumers when the state-owned fuel monopoly raised diesel and kerosene prices from Tk 15 per liter to Tk 80 in November, citing soaring global crude oil prices. The rise led to higher bus and truck fares, which subsequently drove up commodity prices.

On the same day, India cut taxes on petrol and diesel, which relieved Tk 20 per liter at consumer level.

Authorities in Bangladesh paid no heed to similar suggestions. Instead, the government is now looking to raise gas prices for industries and power plants to reduce the subsidy burden, which is expected to be more than three times the budget allocation.

Europe is struggling to cope with the exorbitant price of gas, but countries are taking a series of measures such as cash grants, payment deferrals to compensate for the pressures on people in winter when gas demand increases to keep homes warm.

Britain’s energy regulator, the Office of Gas and Electricity Markets (Ofgem), last month set an energy price cap to prevent energy companies from charging the price of gas as they please in order to protect 22 million customers price shocks.

Even Sri Lanka chose not to raise energy prices, ignoring demands from oil and gas companies.

Here, water and gas consumers are exposed to direct price increases by official agencies as well as private companies as in the case of soybean and palm oil.

Earlier this month, the Department of Commerce approved increases by importers and refiners of edible oil – Tk 8 per liter for soybeans and Tk 15 for palm oil. The latest increases followed a similar rise in October.

Also commenting on the rising cost of public sector goods and services, CPD’s Prof Mustafizur said the burden of extra expenditure caused by inefficiency, project extension and cost escalation is being passed on to ordinary people. As a result, consumers have to spend more.

Saima Haque Bidisha, professor of economics at the University of Dhaka, said the overall flow of money into the hands of low-income people is now far less than in pre-Covid times. In this situation, inflation is a great pressure.

Consumers should get some breathing room for at least the next six months by reducing taxes, duties and VAT on import-dependent products, she added.

Stating that the government is increasing the prices of many products and services to minimize the growing subsidy pressure, Saima recommended not withdrawing subsidies in any sector in the next year.


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