In an extraordinary development in fixation of sugar price, the Competition Commission of Pakistan (CCP) has recommended the Punjab government that instead of fixing the sugar price, the government should deregulate the sugar industry to promote free trade mechanism.
Senior government officials told Propakistani that the CCP has issued very bold recommendations to the Punjab government. The punjab government recently fixed the maximum retail price of sugar at Rs. 85 per kilogram 1 following the federal government’s calculated ex-mill price of sugar at Rs. 80 per kilogram. While this decision was taken in the spirit of ensuring that consumers not pay exorbitant prices, particularly in Ramadan, and protect that segment of the population that cannot meet price increases, the Commission by virtue of its mandate is compelled and deems it necessary to caution and explain the unintended consequences of putting a price ceiling.
The CCP has conveyed to the Punab government that the price controls could provide relief, though only temporarily, to the poor directly affected by high prices. More crucial is the fact that price of sugar may rise more rapidly once the controls are lifted to recoup the losses incurred during the period of price control, triggering high price inflation. Rapid inflation is always a concern for consumers whom the price controls intend to protect.
The CCP stated that the price controls could provide relief, though only temporarily, to the poor directly affected by high prices.
More crucial is the fact that price of sugar may rise more rapidly once the controls are lifted to recoup the losses incurred during the period of price control, triggering high price inflation. Rapid inflation is always a concern for consumers whom the price controls intend to protect.
The CCP has informed that rather than price ceilings, the deregulation of the sugar market would be a better and sustainable option to promote free trade mechanisms where price signals can be effectively conveyed to all stakeholders to attract investment, increase competitiveness, and reduce distortions in local supply.
Punjab government has been informed that while the Commission has noted reports of alleged attempts to create artificial shortages of sugar, the Commission is of the opinion that this stopgap measure of ‘fixing price’ can at best provide temporary relief to cap the excessive price increase.
However, this measure fails to benefit the sector or the economy at large. The short-term benefit of fixing prices (if any) does not justify the long-term loss caused by such policies.
Moreover, the price of sugarcane is the major cost factor in production. Mills may be hesitant to buy sugarcane at the Government’s minimum support price (MSP) and pressurise farmers to sell sugarcane below the MSP, which could force farmers to shift from cultivating sugarcane to other crops thus setting the stage for reduced domestic production and undesirable shortages in the market in future.
As a result of this, the Government may have to import sugar and pay the price in the shape of rising import bill for a commodity for which there is sufficient land and infrastructure available in the country, CCP added.
Finally someone with brain. Let the free market determine the price. Also allow anyone to import sugar.
This is not a unique solution – this is a no brainer and an only solution. Let the markets correct.
“Let the markets correct.” This is not some US stock market that will correct on its own. These are grand schemers who will exploit till the foreseeable future. If the free market was to prevail there wouldn’t have been such scams in the first place when there weren’t any regulations.
And if all this fuss was to come to the same conclusion as not to do anything, it would be sheer stupidity. Einstein said, stupidity is trying to do same thing every time and expecting a different result.
Stupid solution. This is not Europe or America where thousands of businessmen will be controlling the pricing. In Pakistan Less than 5 families are controlling sugar business in Punjab. Deregulation means that those families will control the pricing of Sugar. If this is not the job of the government then government should pack their bags and go home. It seems that Mafias are controlling the shots in this Naya Pakistan.
Yes, it is a really weird and illogical suggestion. The reasons mentioned for long term hike in prices of sugar are bogus. Mills will have to buy at the support price by the government because there will be no alternative left and since they are making money at these prices, they wouldn’t go for shut down their business option.
These guys at CCP have been lobbied out by the mafia.