Deregulate sugar, wheat markets: FPCCI

Agriculture committee says free trade mechanisms needed to boost competitiveness, curb inflation

LAHORE:

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Standing Committee on Agriculture has recommended the government deregulate sugar and wheat markets, advocating for a free trade approach. This would allow price signals to reach stakeholders, encouraging investment, increasing competitiveness, and reducing distortions in local supply.

FPCCI Chairman of the Agriculture Committee, Ahmad Jawad, highlighted the government's potential plan to abolish indicative sugarcane prices as part of a broader effort to deregulate the sugar sector. Jawad noted that since only Punjab and Sindh currently impose price ceilings, deregulation might push sugar sales to other provinces where prices are unregulated, potentially leading to higher market prices.

The committee warned that while price controls may provide temporary relief for consumers, they could lead to greater price hikes once controls are lifted as businesses seek to recover losses, potentially triggering inflation. "Rapid inflation is always a concern for consumers, whom the price controls are intended to protect," said Jawad.

He added that price controls might also encourage hoarding by suppliers and panic buying by consumers, particularly before Ramazan, leading to shortages and even higher prices. The administrative costs of implementing price controls further burden the economy, he explained.

Jawad advocated for free trade in sugar and wheat, stating that it would benefit consumers by discouraging hoarding and overpricing. He said such measures would promote a competitive sugar industry in Pakistan, leading to economic efficiency. "Price controls distort the supply-demand equation," he pointed out.

The committee believes many problems in the sugar and wheat sectors stem from over-regulation and lack of competition. Deregulating the market would reduce the need for government intervention and eliminate mandatory crushing laws, Jawad suggested.

Citing an example from last year's wheat procurement by PASSCO, Jawad revealed that complaints were received about officials issuing gunny bags to middlemen instead of farmers, causing farmers to suffer. He questioned the necessity of the $1.1 billion wheat import when Pakistan was expected to have a bumper crop, calling the crisis a result of policy failures.

The FPCCI urged the government to limit its role as a regulator and focus on mechanisms to deter hoarders with strict penalties, particularly in the case of essential cash crops. Jawad concluded, "In a fair market, the farmer wins—without cultivation, the millers can't operate."