IndiaPost.com - High grocery prices: Retailers blame suppliers

CHICAGO: There is no ban on export of Basmati Rice from India. Only the Government of India has imposed an export duty of $200 or Rs 8,000 per ton on Basmati rice export and raised the minimum export price (MEP) of Basmati rice from $1000 to $1200 a ton.(i.e. approximately 1000 kgs or 2000 pounds).

So the increase in Basmati price roughly comes to be $400 for 222 bags of 4.5kgs each. It means that the bag that use to cost $6.99 before Indian Government decision, shall now cost approximately $8.78 or if the local gas price increase is to be added, it should be somewhere around $9.50 per bag. But it is not so. It now cost somewhere $13.99 or $14.00 in retails stores at Devon Avenue.

As soon as the Government of India decision on export duty was announced last month, traders were reported to be buying large number of Royal Basmati rice bags from SAM's club and Costco in Chicago.

A source in SAM's club was reported by a leading local radio media as saying that he noticed same person taking at least 30 bags per day for three continuous days! There was such a rush for buying rice from SAM's club that the wholesale store curbed the rice sale and limited it to one bag. Is someone hoarding rice for profit? Obviously so and it is going on.

A visit by this reporter on Indian and Pakistani grocery stores at Devon avenue revealed that it is not only the India Basmati rice, the Pakistani brands stand on par at the price hike. But why has the price of wheat flour has trebled in the past few days? There is no dearth of wheat flour import. A couple of years ago only two or three brands of wheat flour were available in Chicago.

There are plenty now but the prices have almost trebled in recent days. No one knows why. There is a general price hike for Corn Oil and that is admissible, but why the price hike for wheat flour or Pakistani rice? Is someone exploiting the current situation? Retail grocers blame suppliers for price hike.

An angry consumer at a grocery store demanded that, "the Department of Consumer Division, City of Chicago must investigate the unbridled price hike of Indian grocery. If suppliers are exploiting the situation, their business licenses should be canceled."

A retail store owner at Devon pointed that someone has purchased rice bags in large numbers from SAM's club and Costco recently. It will not be difficult for authorities to find out whether such bulk purchase was meant for personal use or hoarding for profit.

As the Indian grocery prices are going skyrocketing, many from Desi community are turning to various Aldi stores in Chicago. A corn oil bottle of 1.5L or 48 Fl costs $2.79 at Aldi stores that amounts to $29 equivalent of a Corn Oil big can of 580 FL sold at $39.00 in retails stores on Devon.

There are many other items comparably on low prices in Aldi stores. A general trend to shopping with Aldi Stores may affect Indian and Pakistani grocery business. There is however a general feeling that the grocery price hike is a direct result of gas price hike in Chicago.

But what percentage it should actually be? The gas price was $2.79 when the rice bag cost $6.99 or wheat bag was somewhere around $7.99. The current gas price is still below $4 a gallon in Chicago but grocery prices have almost doubled or trebled.

That needs to be scrutinized. According to available statistics on grocery price hike nationwide, retail food prices have increased 4 percent in 2007, the fastest rise since 1990. Prices are forecast to grow a further 4-4.5 percent in 2008.

But prices for staples have risen far more steeply. Egg prices jumped 40 percent while flour prices have jumped 50 percent since January, according to the American Bakers Association. Back home in India, The All-India Rice Exporters Association feels that hike in Basmati Rice export duty will only benefit India's rivals such as Pakistan, Vietnam and Thailand as they would capture a large chunk of the traditional markets in United States.