Business | Markets
Minister praises Union Co-op
Ministry of Economy circular has fixed the MRP for essential commodities and set stiff fines for violators.
- By Babu Das Augustine, Banking Editor
- Published: 00:02 March 9, 2008
Dubai: The UAE Government's attempt to control the prices of essential goods through fixing maximum retail price (MRP) could seriously affect the availability and quality of goods in the market, retailers warned on Saturday.
The Ministry of Economy has sent out a circular to retailers, a copy of which Gulf News has obtained, directing retailers across the country to stick to the maximum price bands prescribed by the ministry.
The circular issued by Hashim Al Nuaimi, director of the consumer protection department of the Ministry of Economy, has set maximum retail price for commodities such as eggs, basmati rice, chicken, drinking water. While any excess pricing of these commodities above the MRP set by the ministry will invite a fine of Dh10,000, hoarding of these items can invite a fine of Dh20,000.
Along with fixing MRPs, in the case of some dairy products and fruit juices, the ministry has allowed the retail prices to be raised by 10 per cent and 17 per cent respectively.
A cross-section of consumers across Dubai welcomed the move and said the MRP should be extended to all essential commodities. "Everything from red meat, to detergent and bread has gone up in price. There should be a maximum price for those too," said Zaima Mustafa, an Omani national.
Many retailers, however, said the fixing of MRP on essential commodities would affect the availability and quality of such goods sold. "The increasing prices of essential goods, particularly food items have been directly linked to the increased production costs and the increased cost to importers. We have discussed the matter with many of our suppliers who are not willing reduce price," said Ashraf Ali M.A, executive director of LuLu Group.
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Smaller supermarkets said that if the MRP is strictly enforced they will not be able to stock most of the items as the MRP prescribed by the Ministry is below the cost price. "We will soon see a situation that a lot of these items going off the shop shelves. Already there is shortage of chicken egg and some varieties of rice. As most food items are imported and the prices of these items are determined by their suppliers," said Abdullah No'man, manager of Al Talib supermarket in Sharjah.
The UAE reeling under high inflation has been facing a significant increase in food prices partly due to the rising global food prices and significantly due to the declining purchasing power of the dirham against euro and major Asian currencies due to its peg to the dollar.
According to a recent survey by the Emirates Consumer Protection Society (ECPS) revealed that the UAE's annual food price inflation could reach 40 per cent in 2008 from the current 27 per cent last year. According to the survey the share of food prices in the overall inflation was close to 30 per cent.
Although consumers and consumer protection groups are calling for government intervention either in the form of price intervention or subsidies, economists believe that both can distort the market and can have unpleasant
Subsidies
The Emirates Society for Consumer Protection (ESCP) wants the government to raise subsidies on rice, sugar, bread, milk and other basic foods. Subsidies, however, can increase the government's expenditure, which will ultimately result in higher inflation.
"An increasingly important and potentially troubling driver of government expenditure hikes is inflation," International rating agency Moody's said.
According to Merrill Lynch, the exchange peg has become the main source of inflation. "Capital inflows have gained pace, and the region is awash with cash. With heated domestic demand, pegs to the sliding dollar not only import inflation and fuel domestic liquidity but, more importantly, they also import easing monetary policy as the Fed cuts rates and GCC countries follow suit. This promotes inflation further," Turker Hamzaoglu, EMEA strategist, Merrill Lynch.
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