The Competition Commission of Pakistan (CCP) has urged the government to desist from entering into any arrangement that would encourage collusive behaviour among economic agents in any sector, with special reference to the crisis in sugar prices. Talking to Business Recorder, CCP sources said that an understanding between the government departments and different cartels limit the free market forces in rationalising the prices.
However, they said, the CCP could only give advice to the Ministry of Industries on the need to avoid collusion, "and it cannot direct the Ministry" under the relevant rules. They said that the CCP had demanded the rationale behind the sugar price rise from the Punjab Sugar Mills Association but had not received any response. Meanwhile, the CCP has also issued a Policy Note, informing the government that its actions should not encourage cartelisation, and any mutual agreement would further encourage cartels to increase their prices.
In the Note, it has been recommended that the federal government should terminate the agreement between the All Pakistan Sugar Mills Association (APSMA) and the Ministry of Industries and Production, fixing the ex-mill rate of sugar in Sindh and Punjab.
The CCP contended that such agreements would have detrimental effect on competition, thereby eradicating and/or seriously reducing the benefits that competitive markets deliver to the consumers. The government must not provide any patronage to anti-competitive practices that promote and encourage collusive behaviour on the part of the sugar mills through the platform of APSMA, it said.
It notes that it is really very difficult for CCP to condone the involvement of the government in this ''Agreement'', and implementation of such agreements under the auspices of the government manifests legitimisation of practices prohibited under law.
The Commission has received reports of alleged attempts to create artificial shortages of sugar, and argues that the stopgap measure of ''fixing price'' can at best provide temporary relief to cap the excessive price increase. The Note adds that the measure fails to benefit the sector or the economy at large as the short-term benefit of fixing prices (if any) does not justify the long-term loss caused by such anti-competitive policies.
The Policy Note further says that since the Commission is entrusted with the mandate to provide free competition in all spheres of commercial and economic activity to enhance economic efficiency and to protect consumers from anti-competitive behaviour, the Commission feels obliged to raise its concern to the government in relation to policies that impinge upon free competition and economic efficiency in any sector.