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CCP studies prices of 10 food items to address inflation

October 30, 2022

ISLAMABAD: Competition Commission of Pakistan (CCP) has completed a draft study to address market distortions and promote efficiency as well as competition in the value chain of 10 essential food commodities in Pakistan.

The study focused on onion, edible oil and ghee, potato, poultry, wheat, sugar, milk, rice, tomato, and pulses, which constitute 63 percent of an average household's monthly expenditure on food items.

Pakistan has been facing double-digit inflation since November 2021, which prompted the Economic Coordination Committee to take stock of food inflation. To do so, the CCP was tasked by the National Price Monitoring Committee (NPMC) to look into the reasons for price increase in essential commodities. The CCP shortlisted 10 major food items from the list of 51 essential commodities in the SPI basket for this study.

The CCP has shared the draft study and held consultative sessions with the stakeholders, including representatives from the agriculture and food ministries, research institutes and other related departments from Punjab, Sindh, and Khyber Pakhtunkhwa.

CCP Chairperson Rahat Kaunain Hassan and her team, including Member Mujtaba Ahmed Lodhi, and senior officers held threadbare discussions with the stakeholders on the study’s recommendations. The session with the stakeholders from Balochistan would be held in the upcoming month.

After taking the input of all stakeholders, the study would be finalised with consolidated recommendations to the government of Pakistan for addressing market distortions so efficiency could be ensured in the value chain of the selected commodities.

Abovementioned ten commodities combined showed a 35 percent increase in price in July 2022 as compared to July 2021. Highest increases were recorded in the prices of masoor (92 percent), onion (89 percent), edible oil (77 percent) and gram (52 percent) during the same period.

The study outlined the underlying causes of the price hikes and supply chain issues. Those included inappropriate policies and regulations distorting the markets, inhibiting competition, and discouraging private investment. Besides, the study also said that least efforts were made to promote research, innovation, and technology utilisation to enhance crop yield and productivity.

In its recommendations, the study urges a shift of the government policy focus from the current major crops of sugar and wheat to equally significant other crops having export potential such as pulses, other cereals, oil seeds and vegetables.

To address the issue of inefficiency owing to low yield, it recommends taking R&D initiatives in the high yield varieties and the Federal Seed Certification and Registration, Department, provincial Agriculture Extension Departments, Seed Development Departments to develop mechanism for dissemination of high yield seed varieties, R&D on high yield crops, creating awareness about high yield seeds and genetically improved crops and their cultivation.

The study recommends a complete overhaul and increase in the number of the currently 345 agriculture produce markets (APM) in Pakistan, including both public and private grain, fruit and vegetable markets.

The study pointed out that protectionism through export/import ban and tariffs acted as barriers to entry for traders to reach international markets.

For example, protection to wheat and sugar from imports through a tariff of 60 percent and 40 percent respectively not only causes higher prices for domestic consumers, but also provides no incentive to invest in higher yield varieties.

It highlighted agricultural financing as a prerequisite for an efficient agriculture sector. It recommends increasing the farmers’ access to finance for all types of crops and production areas. High mobile penetration allows 88 percent of the population to have access to internet/broadband, which significantly increases the potential for agriculture e-commerce. Keeping that in view, the study recommends the government to develop an agri e-commerce ecosystem and educate farmers on the agri e-commerce opportunities.

The study recommends the government to promote contract farming. It said that this would lead to economies of scale and farm mechanisation and strengthen the farmers-processor relationship, while improving access to finance for both the processors and the farmers. It could also prove to be equally favourable for banks/DFIs by reducing the cost of doing business and post disbursement monitoring.

While emphasising the importance of storage for food security, the study recommends the government to make adequate arrangements for storage of wheat, rice, seeds of pulses, and oilseed crops.

To avert the crisis of food security and food price volatility amid the flood situation in Pakistan, Strategic Grain Reserves (SGRs) could be a useful policy tool where target disbursement was made to needy people.

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