Price controls by DCs: Commodity sector against principles of free-market economy: CCP findings

ISLAMABAD: The Competition Commission of Pakistan (CCP) has found that the heavily regulated essential commodities sector through price controls at retail level by deputy commissioners is against the principles of a free-market economy, and is creating black markets.

According to a pilot study, “Assessment of Supply Chain from Farm gate to Retail-(Tomato & Onion)” in Pakistan 2021 conducted by the CCP, the retailers in general have expressed concerns over the pricing mechanism established by provincial governments, which may be one of the reasons behind the wedge between that actual retail prices and those set by the district administration.

The Competition Commission of Pakistan (CCP) has found that the major factors which influence availability and pricing include supply gaps, perishability and shorter shelf life, lack of grading and packaging, manipulation by commission agents, level of enforcement of price regulations, and inadequate awareness about prices and availability.

A variety of factors influence tomato and onion supply.

The study’s key findings revealed that a variety of factors are disrupting supply chains, distorting competition, exploiting farmers, and adding inefficiencies to the economy.

Prices of essential kitchen items witness upward trend

The key findings revealed that the significant price variations have been observed from farm gate to retail across all study districts.

The actual retail prices are significantly higher than the prices, which were obtained after adding overheads, transportation, and profit margins to the auction price, as per assumptions by the provincial governments.

Inadequate availability of quality seeds and other inputs reduce yield.

The non-institutional financing by the commission agents exploit farmers and are one of the barriers to entry in other markets.

High post-harvest losses and absence of grading, packaging, and branding regulations also limit the ability of the farmers and market players to compete, the CCP observed.

The CCP recommended that better coordination between federal and provincial governments can help prevent distortions in price and supply chain.

For instance, timely sharing of data can prevent price manipulation. Consequently, increased awareness among market players about availability of produce and its prices will foster competition.

This coordination between federal and provincial governments is necessary, in fact urgent, to ensure uninterrupted supply of the essential commodities.

The production forecast, glut and stress situation of the crop be considered at each province before making such decisions.

The short-term recommendations included effective supply chain management.

The commission agents or the Beoparis are the primary controllers of the supply chain and movement of vegetables from one Mandi to the other.

The study team observed during the survey that the same lot of bulk onion (usually a truck) is sold multiple times starting from one Mandi, to the other and then to another. Timely data sharing among provinces, districts and its public availability may be useful to identify the supply gaps.

The “AMIS” by Punjab and “Mandi App” by the KP government could be effectively utilised for sharing information publicly. The district administration should closely observe and ensure that such information is openly available in Mandis, so that traders could ensure timely supply, the CCP analysed.

The medium term recommendations of the CCP revealed that most of the post-harvest losses could be prevented through adequate training of farmers regarding the appropriate harvesting time, techniques and the use of packing materials for transportation to Mandis.

The role of provincial agriculture extension departments is pivotal in providing such training and increasing awareness among farmers on strategies to reduce the post-harvest losses.

The CCP pointed out that the farmers are exposed to exploitation by the commission agents.

The provincial government may plan to provide easy and interest-free loans to farmers.

Kissan cards may be a good initiative in this regard.

The CCP stated that the crop reporting is of great importance in the planning process.

Crop reporting requires comprehensive reforms, which may be planned in the medium- to long-term.

DC for ensuring sale of essential commodities at govt rates

The medium-term reforms include capacity development, integration, and triangulation of the information with other departments such as revenue, agriculture extension, and SUPARCO.

Under the long-term recommendations, the quality inputs such as seeds, fertilisers, water and pesticides are primary determinants of good production and high yield.

Pakistan is importing nearly 80 percent of the tomato seeds and 40 percent of the onion seeds.

The respective provincial administrators must assure the supply of seeds of those types that are suited to the climatic conditions of each ecological zone.

Similarly, the provincial government should look into the excessive use of pesticides, which may be a threat to food safety.

It is necessary to promote and subsidise the seeds of disease-resistant agricultural varieties.

The post-harvest losses in tomato and onion are significant.

In the regional countries, India has adopted useful strategies to reduce the post-harvest losses, which may be instructive for Pakistan. The provincial governments may consider enhancing cold storage facilities through Public-Private Partnerships.

The private sector should be encouraged to build cold storage facilities. These facilities may have only a limited impact on tomatoes but could be a very useful investment for other perishable essential commodities such as potato, onion, etc.

However, together with other strategies these facilities could play a significant role in reducing the post-harvest losses.

The CCP stated that the introduction of new generation packaging materials can help reduce losses. In addition, foldable plastic packaging or nestable containers could be introduced.

India incentivised and introduced the use of plastic crates, which proved very effective in reducing the post-harvest losses during packing and transportation. Pilot projects for new generation packaging materials may be launched by provincial agriculture extension departments.

Currently, there is less than one percent processing of tomato and onion in the country.

Although this is a long-term strategy, but improving the value addition and processing industry of tomato and onion can significantly help reduce the post-harvest losses, deal with the glut and stress period of the produce, increase economic activity, create jobs and generate revenue for the country. The government needs to create an enabling environment for the private sector and incentivise the processing industry. It can help raise awareness among consumers and consequently, bolster agricultural production, the CCP report added.

Copyright Business Recorder, 2021