Nepali Times
Economic Sense
Playing hard-to-get


Having seen over the last few months the things people will do when there's an inadequate supply of cooking gas, this Beed has been inspired to analyse how we Nepalis go about managing supply. Historically, our economy has been oriented towards trading and this has basically revolved around managing supply for better gains.

So, the sahuji in Bhojpur hoards supplies before the monsoon, as access to the lowlands get difficult due to swollen rivers. No different are his brethren in Kalimati who hoard cases of beer before the budget session of parliament. Even state-run corporations appear to have perfected the management of supply for better profitability-crises in sugar supply hit only around Dasain and Tihar. Come news of a landslide in Krishnavir on the radio, and gas stations in Kathmandu hang out their No Petrol signs. Controlling supply has been the greatest means of making money for traders. It is a national practice.

The regulation of trade is very difficult the world over, and it comes as no big surprise that it is virtually impossible in Nepal. Traders here have an intricate understanding of the rule of demand and supply, and are adept at exploiting it to their maximum advantage. Yes, a free market does stipulate that levels of demand and supply determine prices-but in Nepal this is totally twisted. The fact that the Valley has just one "lifeline"-one road connected to the supply stream-only encourages people to build up buffer stocks, especially just before the monsoon. In other parts of the country the absence of a decent transportation infrastructure is the only excuse anyone needs to stockpile goods. Further, a basically agrarian economy means that large numbers of people only have cash in hand after the harvest. So there's a complete distortion of the demand curve due to fears of a supply crunch.

The political and bureaucratic machinery also helps the business of managing supply to prosper. Traders are favoured to ensure that anyone in a position of authority can also get a slice of the pie. If there's a shortage of sugar in the market, a person in government only needs to make a call to provide a truckload to a dealer he favours. The dealer then sells it at a premium and shares his booty with his political master. The tentacles of political influence are visible even at the village level, where a grassroots leader may supplement his income by controlling the supply of seed or urea.

Managing supply has become one of the most interesting areas of management studies. Problems surrounding supply management do not go away with the advent of a digital economy. The extensive Public Distribution System (PDS) in India hasn't been able to iron out all its problems even after decades of functioning. In Nepal, different mechanisms have been used, from having fair-price shops during Dasain, to running something along the lines of the PDS in rural areas, but there have been few gains.

The cost of the business of supply management is not only the hundred rupees that one pays to get that cooking gas cylinder through the back door. The cost is the man-days lost in queuing for hours to get it. The productivity of the thousands who queue up for that litre of kerosene or the hundreds who line up for their share of fertiliser is a drain on the country's resources. Over half of Nepal's population lives a hand-to-mouth existence, and they are made to sacrifice days of earning, queuing up to get ssssbasic supplies.

This won't be regulated by legislation or resolved by economic theory. It's an issue of morality. It may be helped by education, but in the end the heart of the businessperson has to undergo a transformation. With every extra rupee that he makes, the country is poorer several times.

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(11 JAN 2013 - 17 JAN 2013)