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EDITORIAL: The Competition Commission of Pakistan’s (CCP’s) enquiry report has found cartelization amongst the poultry feed companies citing this as the key factor in the recent rise in prices of chicken and eggs requiring urgent government remedial measures on three counts.

First, the Prime Minister and his kitchen cabinet have consistently been blaming the mafia, read cartelization, for high prices through illegal and rather blatant supply manipulation. The irony is that while in other countries cartelization is not possible in products/items that are: (i) not distinguishable between various producing units, for example, chicken, eggs, fruits, vegetables, sugar, cement as opposed to say toothpaste, or (ii) the number of suppliers and consumers is too large to enable them to collude and thereby influence prices, yet this somehow is the norm in Pakistan. This could well be because of the establishment of powerful associations of different trades, that at different times or occasions been accused of, having successfully manipulated government policy on the one hand, through minimizing taxes and access to cheap credit, while maximizing windfall profits through supply manipulation on the other hand.

Second, it may be recalled that soon after taking oath, Prime Minister Khan publicly stated that rural women should be given chickens as part of a poverty alleviation strategy as this would not only enable the women to provide protein rich food to their families, with obvious positive implications on the serious issue of stunted growth in Pakistani children - another major pledge of the Prime Minister’s - but also provide them with a livelihood through sale to the public. This was abandoned as perhaps the Prime Minister realized that simply giving free chickens would not achieve the desired results without training.

And finally, the feed industry, which comprises approximately 75 to 80 percent of the cost of broiler meat and eggs, defends itself by pointing out that prices have been raised not because of collusion, a claim that was obviously rejected by the CCP, but because of the massive rise in their input costs due to (i) rise in the price of raw materials used; for example, corn prices (which they attribute to larger scale hoarding), soya bean meal prices, wheat bran, canola meal price, sunflower meal price; (ii) lockdown that has reduced demand due to the closure of restaurants and hotels thereby raising prices; and (iii) high regulatory/customs duties on imports of these raw materials as well as sales tax. This necessitates a revisit of the government’s flawed tax measures.

Pakistan Bureau of Statistics (PBS) reveals that the year-on-year sensitive price index for the week ending 6 May 2021 depicted a rise of 17.05 percent with the highest raise in chilies powder (137.09 percent), followed by electricity (67.03 percent), chicken (49.16 percent) and eggs (48.15 percent). Needless to add that in the week ending 13 May 2021 with the 9-day-long Eid holidays the rise in the price of chickens (broiler) would have overtaken that of electricity and chilies powder. In other words, there is a need for a government action.

Blaming previous administrations for all that ails the economy (including the steady rise in food inflation), however, is no longer a politically viable narrative two years and eight months into the PTI government’s tenure. The Khan administration needs to focus on its own flawed monetary and fiscal policies as well as on illegal actions taken by cartels to come to a better understanding of how to go about checking prices. The solution is not in extending subsidies or through imports to minimize the cartels’ influence (which has implications on the foreign exchange reserves) but to deal with the cartels in a manner that collusion becomes financially untenable for them. For this purpose, laws need to be suitably amended and the stay orders granted to those accused of collusion by the CCP need to be aggressively vacated.

Copyright Business Recorder, 2021


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