Izzat Rubab
ISLAMABAD:
The Competition Commission of Pakistan (CCP) has opposed fixing of maximum retail price of sugar by the government and recommended deregulation of the entire sugar market as a better and sustainable option to promote free trade mechanisms.
Following the federal government’s calculated ex-mill price of sugar at PKR 80 per kilogram, Punjab’s provincial government has fixed the maximum retail price of sugar at PKR 85 per kilogram. However, CCP has opposed putting a price ceiling by the government.
In a policy note, the CCP declared 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.
“Better options for Pakistan than setting a price ceiling lie in deregulation, removing subsidies, and ensuring competition in the market,” said CCP.
According to CCP, price controls are meant to prevent prices from exceeding a certain maximum level. But price controls have ramifications on both the demand (consumer) and supply (farmers and millers) sides.
Similarly, price controls rarely work and fail to protect those consumers who are the intended beneficiaries. For sugar, as Punjab is the only province to set a price ceiling, one immediate effect could be that sugar moves to other provinces where no price ceiling is in place and it can command a higher market price.
Likewise, price control could also encourage hoarding by suppliers or impulsive buying by consumers, especially ahead of Ramadan, both of which will likely result in shortage in the market. This shortage could directly affect price with the result that consumers may end up paying even more for sugar than what they would have to pay if price controls were not in place.
Furthermore, price controls have a direct distortionary effect on the supply-demand equation.
It is pertinent to mention here that incumbent CCP chairperson has complete blessings of Imran Khan’s government.
