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February 29, 2020

Revamping price management

February 29, 2020

It’s almost every day that the Islamabad district administration publishes the rate list of fruits and vegetables on social media. People still always complain of retail shops overcharging shops by more than 100 percent. The same treatment is meted out to the monthly official rate list of essential commodities by the retailers.

The daily list is based on the average wholesale price of the perishable food items –vegetables and fruits – which is determined through an open auction based on demand and supply. For non-perishable commodities, the administration fixes the prices in consultation with the various traders' representatives with an allowance of a profit margin of 15 percent. But despite traders' involvement in determining rates, the district government struggles for their enforcement.

However, in some big stores, there are some insignificant corners where products with the ‘deputy commissioner rates’ are placed. The manner in which these products are displayed as compared to high priced products give the impression that these are substandard.

This faulty implementation of laws to curb overcharging is happening under the very nose of Prime Minister Imran Khan and his cabinet which is proactively engaged in reducing the prices of essential food commodities to control the higher inflation recorded in Consumer Price Index (CPI) and the Sensitive Price Index (SPI). But the prescription of the PTI government is no different from the previous governments – that of treating the price hike as a macroeconomics issue with increasing supply through import or export adjustments, smuggling control, support price incentive to farmers, and retail incentives to buyers by providing subsidy through utility stores.

Despite these usual measures, every year at least three times there is a public outcry on price hikes, the maximum being in Ramazan. These official cosmetic measures may suppress the hike for a while, but they do not prevent future unauthorized price hikes because of the policy confusion between the federal, provincial and district governments.

The policy confusion can simultaneously hold all three tiers of government to the price hike and absolve them of the responsibility to efficiently regulate the production, storage, transportation and sale of essential commodities.

This was reflected in a recent meeting of the National Price Monitoring Committee (NPMC) held under the chair of Federal Finance Secretary Naveed Kamran Baloch. The meeting held the provincial governments responsible for the prevailing price hike and asked them to accept responsibility for it.

"It must also be remembered that after devolution, the function of price control falls under the domain of the provinces," Mr Baloch told the meeting. “The provinces must accept this responsibility and make efforts to appease the masses,” he said.

Senior representatives of the provincial governments, the Islamabad Capital Territory Administration, the Pakistan Bureau of Statistics, the ministries of commerce and food security, the Utility Stores Corporation, customs, and the cabinet division attended the meeting.

An official statement issued after the meeting quoted the finance secretary as saying that local governments should be ready and prepared to take additional measures during Ramazan to save people from the price hike. "If any help is required from the federal government, it will be ready to facilitate."

This statement highlighted the fact that there are no official linkages between the NPMC and the District Price Control Committee (DPCC), which usually comprise official members, traders and dealers.

Ironically, the NPMC also failed to recall that in 2015 it asked the Competition Commission of Pakistan, a federal agency responsible for promoting competition among market forces to promote fair trade, to review the framework relating to the control of pricing and supply of essential food commodities and make recommendations.

The recommendations were made, but failed to attract much official attention.

The CCP review highlighted the fact that different laws related to the subject are not clear in scope, are scattered and do not supplement each other’s implementation or enforcement.

At least five laws are dealing with price control. These include the Food Stuffs (Control) Act, 1958; Price Control and the Prevention of Profiteering and Hoarding Act, 1977; Agricultural Produce Market Ordinance, 1978; Essential Articles (Control) Act, 1973; and Registration of Godowns Act, 2014.

The Price Control and Prevention of Profiteering and Hoarding Act empowers the federal government to control the prices, sale and distribution, transport and movement between provinces and withholding of stocks of different 'essential commodities.'

The Food Stuffs Control Act gives broad-ranging powers to the provincial government for control of supply, distribution, and movement of, and trade and commerce in foodstuff. These powers include controlling the prices at which any food is bought and sold and regulated by licences or permits for the storage, transport, distribution, disposal, acquisition, use, or consumption of any foodstuff; and prohibiting the withholding from sale of any food ordinarily kept for sale.

The Agricultural Produce Market Ordinance primarily deals with regulating the purchase and sale of ‘agriculture produce’ by establishing and administering markets/mandis. Under the ordinance, the provincial government may, by notification, declare its intention to exercise control over the purchase and sale of such agricultural produce in a specific area through notification. Once the area has been notified, a market is constituted for its administration.

The Registration of Godowns Act was promulgated by some provinces with the express purpose of curbing hoarding and ensuring a stable supply and availability of essential commodities. It also requires the registration of godowns with the agriculture department and requires maintenance of records of the movement of essential products in and out of the godowns.

A reading of these laws shows that they do not build any price management system at the district level but only render unbridled discretionary powers of damage control to the bureaucracy.

The CCP also identified that the implementation of these laws remain lopsided mainly because they are not backed up by local data such as identification of primary sources of supply from import or different production regions and mandis and where export is done and also to examine the demand and production trend in neighboring countries.

The CCP is correct in highlighting the lack of statistics at the district level concerning the periodic requirement of different commodities and the number of points of sale and the quantity and origin of different produce.

Different districts also have different price determining mechanisms that mostly start with fixation of the wholesale price (WSP) in the mandi. To the WSP is added wastage by the rate of one percent of WSP per kg, Rs30 per kg transportation, 75 paisa per kg packing, and then retail profit that may be three percent of WSP.

In Khyber Pakhtunkhwa, there is no standardized format for price determination. There the prices are set by observing wholesale prices in neighbouring districts and negotiations with traders representatives.

The CCP has also recommended to the government that supermarkets, big mart stores should be excluded from the implementation of existing laws as their features are different from the existing traditional markets. It also recommended that the role of intermediaries should be reduced, and the government should establish big superstores through public-private partnerships and by reducing the prices.

But these recommendations are half cooked as the CCP did not take into account the existing provincial consumer protection laws that deal with packing and labeling of the product.

Instead of some sporadic short-term measures, all three governments must come up with a vertical price management system which is based on district-level statistics of the supply and demand of the essential commodities and the point of sale. Only then can the governments safeguard the interest of the consumer and the market.

The writer is a freelance


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