Market distortions: CCP brings out study on 10 essential items

ISLAMABAD: The Competition Commission of Pakistan (CCP) has strongly criticised the government’s policy of focusing on major three crops i.e. wheat, rice and sugarcane, impeding the growth of other crops and hindering the efficiency and competition in essential commodities.

The CCP on Monday issued a new study on 10 essential commodities to identify and address market distortions.

According to the latest study on essential commodities, the CCP review of these commodities has identified multiple issues that hinder the efficiency and competition in these commodities. Lack of R&D in high yield varieties and under-developed seed dissemination mechanism is resulting in lower yield and inefficient use of resources.

The CCP study revealed that the government also supports agriculture through subsidies on urea fertilizer, water and energy. These subsidies favor urea fertilizer-intensive crop production over pulse production, which requires relatively less urea fertilizer. Therefore, the government needs to review these subsidies on certain crops and allow the market forces to play their role.

ECC sharpens its focus on winter wheat crop

The current study outlines underlying causes of the price hikes which include inappropriate policies and regulations that distort markets, inhibit competition and discourage private investment, as well as limited and poorly implemented efforts for research, innovation and technology dissemination. On the production side, insufficient productivity, market distortions, and limitations of trade result in market rigidities that push prices. Subsidies provided by government on urea fertilizer, water and energy to support agriculture distorts the market and encourages more urea fertilizer intensive crops.

The CCP review of these commodities has identified multiple issues that hinder the efficiency and competition in these commodities. The government policy focus on major three crops (wheat, rice and sugarcane) is impeding the growth of other crops. Lack of R&D in high yield varieties and under-developed seed dissemination mechanism is resulting in lower yield and inefficient use of resources.

Limited access to finance for farmers growing crops other than cereals acts as disincentive to grow other crops, leading to non-level playing field for all crops. Access to agricultural markets and asymmetric information of market situation often deprives farmers of their optimal return and incurs losses to their produce. High government involvement in storage of grain has resulted in crowding out of private sector from storage industry.

Furthermore, the storage capacity is less than the requirement of country which results in losses of crops.

Copyright Business Recorder, 2022