EDITORIAL: The price of sugar has inexplicably risen by a 100 rupee per 40 kg bag as imported sugar was released onto the market. This trend clearly indicates that perfect competition conditions, where supply and demand determine the price, do not prevail in Pakistan’s sugar market but that some other factors are at work. One such factor could well be market perception, particularly the sellers perception, on possible actions the government may take to bring prices down by appropriately dealing with widespread imperfect market conditions that include: (i) rampant smuggling across Pakistan’s over 2000km-long porous borders, particularly when price is cheaper in Pakistan relative to countries with contiguous borders including India, Afghanistan and possibly Iran; (ii) cartelization that allows the manufacturers to manipulate prices through manipulating supply; and (iii) in this particular instance there has to be collusion by the wholesalers and retailers that has rendered an injection of the commodity into the market via imports ineffective.
The question asked time and again is why has the Khan administration been unable to check price of sugar and wheat/atta given the fact that imperfect market conditions in these two commodities have prevailed since decades even though in most other countries these commodities operate in perfect market conditions where the buyers and sellers are in large enough numbers not to be able to influence price?
The Prime Minister released an explosive sugar and wheat inquiry report to the media which did not contain any surprises though it was hailed as the first time-ever that the influence of the sugar barons and the wheat mafia on domestic prices through the country’s federal and provincial governments was acknowledged. Subsequently, the government succeeded in vacating a stay order requested by the sugar mill owners thereby allowing it to proceed against their alleged illegal activities, the changing of the guard in the Competition Commission of Pakistan to ensure appropriate action, and allowing imports to check the price rise. All these appropriate steps aside, the price of sugar continues to rise.
The Khan administration has shown a lackadaisical approach towards monitoring prices, an activity that was undertaken on a weekly basis during previous administrations both at the federal and the provincial levels and which allowed the government of the day to assess a possible shortfall of any commodity in a timely manner and to take appropriate measures. In some instances a subsidy was extended to the Utility Stores Corporation while in others the supply was raised through imports and/or through setting a minimum support price. This careful and regular monitoring has been lacking during the past two and a quarter years.
The problem has been exacerbated by frequent delays in setting the minimum support price, in allowing imports and in holding those responsible for extending an export subsidy when there is a shortage in the domestic market. Recently, the Prime Minister announced that his party’s Tiger Force, with no judicial powers, would monitor the prices in different retail outlets and inform the relevant authorities to enable them to take appropriate actions. This particular additional tier without any juridical powers was bound to be rejected by the retailers who have complained about harassment by the Tiger Force, a charge that they would not have been able to hurl at those with the requisite powers.
To conclude, the Prime Minister’s repeated claim that he would personally monitor prices, a claim that should increase the public’s comfort level, has been badly eroded because each time he claims to do so the price of sugar has risen. A better option would be not to reinvent the wheel and use the system existing at the time his tenure began to monitor prices and consequently take decisions in a timely manner.
Copyright Business Recorder, 2020
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