Study examines possible price cap return

The Trade Practices and Consumer Protection Authority (TPCPA) has initiated a new draft study and taken it to the Ministry of Trade and Industry to set a profit margin on basic manufacturing products like cement, steel, and food items which are often asked for by consumers and other products prone to destabilizing Ethiopia’s economy.
The draft study which has yet to be sent to the Council of Ministers and Parliament for ratification may set up a 20 to 30 percent profit margin if it is ratified.
The Ministry of Trade which is deeply reviewing the study is expected to forward comments on it in a short period of time and then bring a report to the Council of Ministers.
Sources form TPCP told Capital that the aim of the profit margin is not to interfere with the balance sheet of companies. Rather, it is meant to stabilize the market that has faced recurrent inflation.
“For a couple of years products like cement and steel have been selling at high prices and have been erratic, without any economic reason. The Government does not want to impose price controls but at the same time it can’t stand by and watch people suffer, so the issue needs to be discussed. We have to formulate something when consumers are affected.’’
“The study is also looking at ways to protect the market from unwanted trade practices and competition.’’
The then Prime Minister Meles Zenawi was trying to set price caps to stabilize the market but due to wide opposition from traders, the government lifted them. Eventually, prices of manufacturing and consumer foods and products rose.
Teke Redai, an economist, told Capital that the government should increase the production of products rather than limit the profit margins.
“The basic thing we have to do is increase products. When products increase price will not go up frequently as some business group wish. So to increase products we must encourage our citizens to start more businesses.’’
“When we come to profit margin, the government should exactly know the cost of the production of the factories otherwise it will be difficult to determine the correct cost or set a profit margin,” he added. Currently, only fuel is subject to price caps.