The government’s plan to remove ceiling prices and subsidies for chicken, eggs and bottled palm cooking oil will take effect on the 1st of July. It’s a move that has ignited fears around the rising cost of living- we discuss its impact and who will be feeling the brunt of this policy reversal. Then, we dive into what’s needed to to create an effective system that better identifies people in need of government assistance.
Summary
On June 21, the government announced that the recent price ceiling on chicken and eggs, along with the pandemic-era subsidy on bottled palm cooking oil, would be removed from July 1.
Jaideep believes that the price ceiling removal should have been done more gradually in order to find a balance between consumer and producer demands. In addition, to minimise the impact of this measure on livelihoods, the government needs to introduce more targeted direct support for low-income households.
Given that chicken and egg price growth has been suppressed for the last few months, it is likely that prices will rise quickly in the short-run following the price ceiling removal. As a consequence, we might see higher food inflation as well as ”shrinkflation”, in which portion sizes are reduced. Demand for these goods is not expected to fall significantly as these products are ‘price-inelastic’, meaning they are considered a necessity for many households. Regardless, low-income households will be most heavily affected as they are most sensitive to changes in food prices, especially for the urban poor who have no access to homegrown produce.
To address the current rise in prices, Jaideep thinks that the government should address two issues simultaneously. The first is to tackle cost of living issues with targeted subsidies for the B40 and potentially M40 as well as expanding unconditional cash transfer programmes. The second is to find ways to reduce production costs, thereby indirectly reducing the burden on households, through improvements in trade facilitation and simplifying the process of hiring foreign workers to address the current manpower shortage.
Produced by: Kelly Anissa, Lee Chwi Lynn, Sharmilla Ganesan, Jeremy Ng
Presented by: Lee Chwi Lynn, Sharmilla Ganesan