Factors that influence to increase price of goods

Introduction

Controls the market price of all necessary goods are the prime objective of the government. However, with the price increases of essentials capturing headlines of our national newspaper and TVs almost everyday. This price-hiking problem has become the main social problem in Bangladesh and it has great negative impacts on the people. The poor general mass is suffering most in this problem. Besides, it also hindrance the growth and development of the country. Ultimately, the goals of welfare state hampered due to lack of proper controlling the price of necessary goods.

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There are many reasons behind this problem. According to the finance and planning adviser, Mizan Azizul Islam, “International price hike of essential necessities as being responsible for high domestic prices.” In most of the cases, international market price is responsible for domestic inflation. Besides, production and production costing, export and import, preservation system, marketing policies, communication system etc are also responsible for this problem. Moreover, a group of business people are taking the advantages of these and increasing the price of necessary goods. This is unethical and unlawful.

Factors that Influence to Increase Price of Goods

Some factors are influencing the overall situation of the market to increase the price of

necessary goods. They are-

Production

Production cost

Preservation system

Marketing strategy

Export and Import

Unethical business practice tendency

Syndication

Retail sellers unlawful tendency towards benefit

Global market price

Lack of government rules and its implementation

Production

The mass production of goods nationally and globally reduces the price of goods. If it is hampered, then it is impossible to control the price or keep the price of all necessary good in the reach of the poor people. This kind of problem happened when big countries such as China, India, Korea etc fail to produce their necessary goods. Last year due to natural disaster India fail to produce rice as a result demand for rice grows up and a scarcity was arise in the global market and at the same time price for rice goes up at a tremendous rate*. And it had a impacts both in the global and local market.

*.Article on the newspaper ( The Daily Star )- Due to natural disaster India fails to produce rice to meet the local demand. So, they are going to buy and preserve rice from the global market.

ally recognized levels.

Production Cost

Production cost depends on availability of production materials such as seed, fertilizer, water, production equipments and the weather. Lack of any of them interrupts the production and increase the production cost.

According to the Section 171.1014, 1 taxable entity that elects to subtract cost of goods sold for computing its taxable margin shall determine the amount of that cost of goods sold as provided by this section. Moreover, the cost of goods sold includes all direct costs of acquiring or producing the goods (Labor costs, raw materials costs, handling costs, storage costs, repairing and maintaining costs etc)*. In addition, the cost of goods does not include the following costs in relation to the taxable entity’s goods (Renting or leasing costs, selling, distributions, advertising costs etc)*.

However, a group of businessperson are not following this rules and regulation and increasing the price of necessary goods for seeking more benefits. On the other hand, the governments are not taking any steps against this group of people though are there rules and regulations to prevent this. The only reason behind is that now a days more than 60% MPs are businessperson.

* Section 171.1012. Determination of Cost of Goods Sold.

In this section:

The cost of goods sold includes all direct costs of acquiring or producing the goods, including:

(1) labor costs;

(2) cost of materials that are an integral part of specific property produced;

(3) cost of materials that are consumed in the ordinary course of performing production activities;

(4) handling costs, including costs attributable to processing, assembling, repackaging, and inbound transportation costs;

Preservation

Lack of proper preservation system has a great impact of the quality of the goods and on its price. Because of this most of the times producer mainly the farmer lose their interest to produce the goods. However, the government tries to make the cold storages in most of the prime cities. Further, it is not sufficient. Moreover, sometimes it is too much costly

for the farmers and so on. Every year just for the lack of cold storage, farmers are dropping out their goods in the ponds, rivers. Such as tomato, potato, onion etc. Besides, it is a reason of environment pollution. The government is not taking the necessary steps to prevent this. As a result, the victim farmers are losing their interest for producing this goods and a scarcity is going to rise in the local market. Therefore, price of this goods are going high which is unreachable to the general mass.

(5) storage costs, including the costs of carrying, storing, or warehousing property, subject to Subsection (e);

(6) depreciation, depletion, and amortization, to the extent associated with and necessary for the production of goods, including recovery described by Section 197, Internal Revenue Code;

(7) the cost of renting or leasing equipment, facilities, or real property directly used for the production of the goods, including pollution control equipment and intangible drilling and dry hole costs;

(8) the cost of repairing and maintaining equipment, facilities, or real property directly used for the production of the goods, including pollution control devices;

(9) costs attributable to research, experimental, engineering, and design activities directly related to the production of the goods, including all research or experimental expenditures described by Section 174, Internal Revenue Code;

(10) geological and geophysical costs incurred to identify and locate property that has the potential to produce minerals;

(11) taxes paid in relation to acquiring or producing any material, or taxes paid in relation to services that are a direct cost of production;

(12) the cost of producing or acquiring electricity sold; and

(13) a contribution to a partnership in which the taxable entity owns an interest that is used to fund activities, the costs of which would otherwise be treated as cost of goods sold of the partnership, but only to the extent that those costs are related to goods distributed to the taxable entity as goods-in-kind in the ordinary course of production activ

* The cost of goods sold does not include the following costs in relation to the taxable entity’s goods:

(1) the cost of renting or leasing equipment, facilities, or real property that is not used for the production of the goods;

(2) selling costs, including employee expenses related to sales;

(3) distribution costs, including outbound transportation costs;

(4) advertising costs;

(5) idle facility expense;

(6) rehandling costs;

Marketing

Still in our country, there are no proper marketing policies of the government. The lower middle class, middle class and upper class businessperson are controlling the markets. Most of the times the farmers are deprived their due prices. The middle class businessperson is unethically increasing the benefit margins. On the other hand, regarding imported goods, the businessperson are syndicating and increasing the prices of goods very high. As a result, for both of this system nationally produced goods and imported goods the consumers of our country are victims of this unethical business. Most of the times the government are the co-sharer of these unethical activities of the businessperson. In one sense, due to dishonesty and corruption justice is like a golden deer for people of Bangladesh. Therefore, the price controlling is hard to reach without development of the humanity.

Besides this in Bangladesh, the business people are not following the perfect marketing strategy. In addition, the government has a lack of control on the over all market condition. Sometimes-due to this many businessperson starts to market their products without testing it and maintaining the quality*. Moreover, they focus on advertisements

and start to market the products at a low price. As a result, the reputed companies who are maintaining the quality of the products it becomes tough for them to sustain in the market. Because they cannot able to market the products at a cheaper rate like their competitors. As a result, the general people have to buy the quality products at a higher rate.

Communication Problem

Communication problem influences to increase the price of necessary goods such as vegetables, imported goods etc. Without proper communication problem, it is tough to distribute the goods properly. It is great problem in Bangladesh and we are suffering this problem year after year. Government is trying to improve the communication problem. However, the steps they are taking are not sufficient for our country. Most of the times in the rainy seasons, prices of goods due to the communication problem. Moreover, every year flood is a common natural disaster for Bangladesh that totally breaks down the transportation system of us. On the other hand, each and every the transportation companies have to face many problems. Our government does not take any steps to secure the communication system. Groups of people take the advantage and collect money from the transportation sectors such as police, Mastans and so on. Due to this types of unethical activities, the cost of goods are incrasing.

Export

According to the Export Policy 1997-2002 the main objectives are to achieve optimum

national growth, narrow down the gaps between export and import, to make the

exportable items more attractive, to develop and expand infrastructure and so on*.

In the year of 2009-2010, we export $18.36 billion. For Bangladesh the main export items are garments, textiles, jute and jute goods, ships, leather, produce, frozen fish and seafood, pharmaceuticals, ceramics, cement. Our main export partners are US 31.8%, Germany 10.9%, UK 7.9%, France 5.2%, Netherlands 5.2%, Kuwait 4.9%, Japan 4.5%,

Italy 4.42% (2000). However, we fail to achieve our export objectives due to political disturbance, economical condition, natural disaster and so on. Every year we are exporting less and importing more. As a result, it create a negative impacts on our economy and price of goods are going up. Because of this unstable economic condition is arising day by day.

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The economy of Bangladesh is constituted by that of developing country. Its per capital income in 2008 was est. US$1,500. This is lower than India and Pakistan. Bangladesh ranked as the 48th largest economy in the world in 2008. In Bangladesh the economy has grown at the rate of 6-7% p.a. Due to infrastructure problems in transportation, communications, power supply and water distribution Bangladesh can not able to achieve it export objectives. These are the reason, which influence to increase the price of necessary goods.

Objectives ( Export policy 1997-2002)

The principal objectives of this policy are :

1. To achieve optimum national growth through increase of export in regional and international market;

2.. To narrow down the gap between the country’s export earning and import payment through achievement of the export targets ;

3.. To undertake timely steps for production of exportable goods at a competitive price with a view to exporting and strengthening existing export markets and making dent in new markets;

4.. To take the highest advantage of entering into the post Uruguay liberalized and globalized international market;

5. To make our exportable items more attractive to the market through product diversification and quality improvement;

6.. To establish backward linkage industries and services with a view to using more indigenous raw materials, expand the product base and identify and export higher value added products ;

7. To simplify export procedures and to rationalize and solidify export incentives;

8. To develop and expand infrastructure ;

9. To develop trained human resources in the export sector;

10. To raise the quality and grading of export products to internation

Import

According to the Import Policy 1997-2002 the main objectives are to make the import policy compatible with the changes in world-market, to ensure the growth of industries and so on*.

In the year of 2008 Bangladesh imports$20.205 billion. Our main imported items are machinery and equipment, chemicals, iron and steel, raw cotton, food, crude oil and petroleum products. Our main import partners are China 11.4%, India 9.1%, Singapore 8.5%, Hong Kong 7.1%, Japan 6.5%.

Government is sincerely committed to fostering a gradual development of free market economy in the light of GATT agreement. For the interest of export promotion & investment in the country, it is necessary to have a long term, stable, facilitative & liberal

Import Policy. The present government has taken steps to extend the duration of the Import Policy from two years to five years. Efforts have been made to make the Import

Policy easier and more liberal by relaxing or rescinding the regulatory provisions of the previous Import Policy. Provisions have already been made to allow import of capital machinery and industrial raw materials on consignment basis without the cover of the Letter of Credit.

Main objectives of Import policy

a) To make the Import Policy Compatible with the changes in world-market that have occurred as a result of the introduction of market economy and signing of the GATT Agreement.

b) To simplify the procedures for import of capital machinery and industrial raw materials with a view to promoting export, and

c) To ensure growth of the indigenous industry and availability of high quality goods to the consumers at a reasonable price

Government has taken steps for quality control in the import of cement, fertilizer etc. In order to protect the interest of the consumers, steps are afoot to ensure that in future all imported consumer items conform to a specified standard of quality. In the present Import Policy Order, second hand/reconditioned machinery are importable subject to fulfillment of certain conditions. Gradually efforts will be made to classify the machinery under H. S. Code. However, lack of proper management sometimes the import polices are disrupted. As a result, it takes too much time to discharge/unload the goods from sea-port. So, the importers have to increase the price of the goods. Besides, syndicating problem is a great reason to increase the market price of imported goods.

Unethical Business Practice Tendency

Most of the cases upper class and middle class businessperson are dishonest, selfish and they are acting as the head of the society*. They are controlling the local market price as their own wish. Besides, they are controlling the era of devils and making wealth and property. Moreover, they are also responsible for syndicating and increasing the price of local market goods. Among the politician more than 60% are businessperson*, they deals with the politicians and political parties and using their power in the wrong direction. Besides, corrupting the business sectors as much as they can just to make profits. In words, it is the Kingdom of dishonest, wealthy and powerful persons. The mass people are helpless to control the price of necessary goods.

According to a report in

*Amar Desh (May 11, 2007), prices of essential food items have increased 25 per cent

on an average in the past four months. According to a report in New Age (May 11, 2007), prices rose between five and 50 per cent during the same period- most of it under the military-backed interim government of Fakhruddin Ahmed that assumed office after the proclamation of a state of emergency on January 11. According to the

government‟s own statistics, inflation increased from just fewer than six per cent in

January this year to almost 7.5 per cent by March. While the government appears to be in denial suggesting that inflation is not really out of control and quite below the danger level, experts fear that it might, in fact, have crossed the double-digit mark driven by the soaring food prices.

*According to SLATE magazine (2007), about our very own mafia groups that group

has come to be known, and often referred to in the media, as the syndicate. Despite the fact that academics, researchers and even politicians have acknowledged such collusion, its existence is denied upfront, both by government officials and businesspeople, in a manner that can be likened to that regarding the mafia. For the longest time, the existence of the mafia, or rather Cosa Nostra, was denied by insiders as well as government officials till misconceptions and myths were laid to rest by, what came to be known as, the Maxi Trial in a court in Sicily over a hundred years after its existence was officially reported. As for the syndicate, it has proved to be invincible and even immune to a state of emergency, which has not been able to curb

Retail Sellers

These types of people are also corrupted. They are mainly creating artificial crises of the product in the local market*. As a result, demand for those goods goes up. Moreover, sometimes the retailers offer gift items with the low quality products. As a result, demand for quality products goes down and they take the advantage by stocking the products.

After few days later they market the products at a higher price.

Global Market Prices

It is also one of the prime reasons for increasing the price of necessary goods. We are insufficient to produce the necessary goods. Therefore, we have to depend on importing goods from foreign countries. Moreover, we need to depend on favorable price of goods of the world market.

*THE RESTRICTIVE TRADE PRACTICES, MONOPOLIES AND PRICE CONTROL ACT

Commencement: 1st Februar, 1989

An Act of Parliament to encourage competition in the economy by prohibiting restrictive trade practices, controlling monopolies, concentrations of economic power and prices and for connected purposes

Government Precaution

In all the cases the government steps towards controlling the price is also major factor. However, I am disclosing with regret that the every sector in our country are controlled by the corrupted businessperson. Most of the cases the rules of laws are absent and the implementations of laws are in near zero percentage. Those who will implement the law, most of them are highly corrupted. Therefore, the result is a big zero. The mass people with a new hope changing the government every 5 years. However, the result is more disappointed and more distress. In a word, it is a land of all evils and injustice. Without developing, the morality it is absurd to change this hails condition. We have to start a revolution from young generation.

Conclusion

Due to all of these lacking it is going to be impossible to control the price of necessary goods. The very poor people are suffering most of the cases by this problem. As a result,

the major portion of the people are going as burden for the society. Therefore, we have to take precautions to avoid this problem for making a happy, wealthy and prosperous Bangladesh.

If we want to achieve this then we have to take serious action and frame effective laws for the elimination of the middle men groups existing various trading circles, by framing effective measure to control bribery between law enforcing agencies and trades. A strong co-ordination efforts and monitoring cells should be formed to observe and check price level of essential commodities in different trade center of the country. Besides,

committees should be established for the co-operation, co-ordination and exchange of information in between different Government officials entrusted to check price level, by re-introducing old rationing system by the Government to stable the prices, by identifying syndicate groups and taking appropriate action against them.