10 essential food commodities: CCP completes draft study aimed at addressing market distortions

ISLAMABAD: The Competition Commission of Pakistan (CCP) has completed a draft study aimed at addressing market distortions and promoting efficiency and competition in the value chain of ten essential food commodities including onion, edible oil and ghee, potato, poultry, wheat, sugar, milk, rice, tomato, and pulses. These commodities constitute 63% of an average household’s monthly expenditure on food items.

The double-digit inflation in Pakistan since November 2021 prompted the Economic Coordination Committee to capture the food inflation and the CCP was tasked by the National Price Monitoring Committee (NPMC) to look into the reasons of the price increase in essential commodities.

The CCP shortlisted ten major food items from the list of 51 essential commodities in SPI for the study.

The CCP has shared the draft study and held consultative sessions with the stakeholders including representatives from the agriculture and food ministries, research institutes, and other related departments from Punjab, Sindh, and Khyber Pakhtunkhwa.

The CCP Chairperson Rahat Kaunain Hassan and her team including Member Mujtaba Ahmed Lodhi, and other senior officers held threadbare discussions with the stakeholders on the study’s recommendations.

The session with the stakeholders’ from Balochistan will be held in the upcoming month. After taking stakeholders input, the study will be finalized with consolidated recommendations to the Government of Pakistan to address market distortions and ensure efficiency in the value chain of these commodities.

The abovementioned ten commodities combined showed a 35% increase in price in July 2022 as compared to July 2021. The highest increase in prices of masoor (92%), onion (89%), edible oil (77%), and gram (52%) was observed during the same period.

The study outlines the underlying causes of the price hikes and supply chain issues including the inappropriate policies and regulations distorting the markets, inhibiting competition, and discouraging private investment, besides the least efforts to promote research, innovation, and technology utilization to enhance crop yield and productivity.

In its recommendations, the study urges a shift of the government policy focus from the current major crops of sugar and wheat to equally significant other crops having export potentials such as pulses, other cereals, oil seeds, and vegetables.

To address the issue of inefficiency owing to low yield, it recommends taking R&D initiatives in the high yield varieties an intervention by Federal Seed Certification and Registration, Department, provincial Agriculture Extension Departments, and Seed Development Departments to develop mechanism for dissemination of high yield seed varieties, R&D on high yield crops, creating awareness about high yield seeds and genetically improved crops and their cultivation.

The study recommends a complete overhaul and increase in the number of the currently 345 Agriculture Produce Markets (APM) in Pakistan including both public and private (grain, fruits and vegetables).

The study noted that protectionism through export/import ban and tariffs act as barriers to entry for traders to reach international markets. For example, the protection of wheat and sugar from imports through a tariff of 60% and 40% respectively not only causes higher prices for domestic consumers but also provides no incentive to invest in higher yield varieties.

The study highlights agricultural financing as a prerequisite for an efficient agriculture sector. It recommends the farmers’ increased access to finance for all types of crops and production areas. With high mobile penetration with 88% of the population having access to internet/broadband, agriculture e-commerce has significant potential, and therefore, it recommends the government to develop an agri e-commerce ecosystem and educate farmers on the agri e-commerce opportunities.

The study recommends the government to promote contract farming, which will lead to economies of scale and farm mechanisation, strengthen the farmers-processor relationship, improve access to finance for both the processors and the farmers, and be equally favourable for banks/DFIs by reducing the cost of doing business and post disbursement monitoring.

While emphasising the importance of storage for food security, the study recommends the government to make adequate arrangements for the storage of wheat, rice, seeds of pulses, and oilseed crops. To avert the crisis of food security and food price volatility amid the flood situation in Pakistan, Strategic Grain Reserves (SGRs) can be a useful policy tool where target disbursement is made to needy people.

Copyright Business Recorder, 2022