As soon as the Pakistan Vanaspati Manufacturers Association (PVMA) submitted its response to the Competition Commission of Pakistan, its representatives appeared in a festive mood; seemingly satisfied that the furnished responses would vindicate PVMA of the alleged collusive practices.
Whether PVMA will continue to exude such confidence, come hearing day on 21st June; remains to be seen. However, the associations response has taken a spanner to the as yet unopened Pandoras box; i.e. the countrys transportation and distribution networks.
The watchdog had flagged PVMA for fixing transportation rates in consultation with transporters, instead of letting individual companies negotiate such terms. While the CCP has based the allegation on past three years records seized from PVMAs offices in Karachi, this practice was initiated in 2001.
In its response, the association has taken a shot at the All Pakistan Oil Tankers Association (APOTOA) and the Edible Oil Carriage Contractors Association (EOCCA), asserting that the two associations have monopolised the transport and logistics services. PVMA has even alleged that "lately the aforementioned authorities came into joint venture and started enforcing their own terms and conditions to manufacturers and PVMA". The ever-watchful eyes of the CCP are not likely to blink twice before honing in on such collusion.
The representative body of vanaspati makers has highlighted over a dozen references ranging from refusal by oil tanker owners to carry supplies, to gunshots aimed in the general direction of PVMA officials who were otherwise difficult to convince.
It is pertinent to note that price negotiations between PVMA and transporters were initiated through a deal brokered by Pakistan Army, which ended a 20-day strike by the truckers back in 2001.
In the interest of keeping too many cooks from spoiling this broth, it appears the governments regulatory bodies may well have to redress the ad-hoc mechanism in place without disturbing the flow of supplies.
Another thorny issue picked up by the CCP was the sticky nature of cooking oil prices that rise in tandem with international rates but seem to stagnate when international rates drift lower. PVMA has presented a plethora of reasons for rising prices; from rupee depreciation to rising financing costs.
Yet the most suspicious factor appears to be the middlemen that hold supplies before they reach consumers kitchens. "The general trend is to wait for supply to nearly finish and demand rise so that they can begin to exploit customers" the PVMA says of wholesalers and distributors.
Much like other essential food items such as flour, sugar and lentils; it is highly likely that at least some of the price distortion in ghee and cooking oils is happening at the behest of unscrupulous middlemen.
While the CCP will likely pass judgement on PVMA in the upcoming hearing, the revelations made in the latters response are crying for a closer look. For the sake of consumers, the CCP should consider conducting more primary research so that it can reach the bottom of this profiteering conundrum.