Sugar rush
Better approach would be for govt to remove itself from role of market participant, instead focus on being regulator.
During calendar year 2012, the government authorised the export of 500,000 tonnes of sugar. PHOTO: FILE
For a country that is one of the largest food producers in the world, Pakistan has a remarkably inadequate and ill-designed agriculture policy. The latest example of this is the manipulation of prices and artificial shortages that have taken place in the sugar market as a result of government policies that seem on the surface to be designed to help the poor, but in reality, only benefit wealthy sugar manufacturers. Sugar millers appear to have taken to hoarding their sugar stocks, while at the same time, being granted permission to export some of their stocks, creating an artificial shortage in urban areas that has resulted in skyrocketing prices. This situation would be utterly unacceptable under any circumstances, but the fact that it is at least partially the result of government policies is especially disturbing.
The problem arises from the fact that the biggest manipulator of prices and quantities in the country is the government itself. Ostensibly, the government is trying to ensure an adequate supply of essential food items at affordable prices to the poor. We applaud the goal, but disagree with the method. Attempting to impose controls on sugarcane prices and having a government entity that serves as the largest buyer of sugar in the country only creates opportunity for unscrupulous entities to try to game the system to their advantage. A better approach would be for the government to remove itself from the role of a market participant and instead focus on being a regulator. This approach has worked out quite well in the past. The government artificially tried to reduce sugar prices by fiat in 2010 and failed. However, when the Competition Commission of Pakistan simply tried to crack down on collusive activity between sugar mills, consumer prices went down and farmers got better prices for their crops. In short, rather than wasting resources on trying to be a benevolent monopolist, the government would make itself, consumers, and farmers much better off by simply controlling collusive activity.
Published in The Express Tribune, November 17th, 2013.
The problem arises from the fact that the biggest manipulator of prices and quantities in the country is the government itself. Ostensibly, the government is trying to ensure an adequate supply of essential food items at affordable prices to the poor. We applaud the goal, but disagree with the method. Attempting to impose controls on sugarcane prices and having a government entity that serves as the largest buyer of sugar in the country only creates opportunity for unscrupulous entities to try to game the system to their advantage. A better approach would be for the government to remove itself from the role of a market participant and instead focus on being a regulator. This approach has worked out quite well in the past. The government artificially tried to reduce sugar prices by fiat in 2010 and failed. However, when the Competition Commission of Pakistan simply tried to crack down on collusive activity between sugar mills, consumer prices went down and farmers got better prices for their crops. In short, rather than wasting resources on trying to be a benevolent monopolist, the government would make itself, consumers, and farmers much better off by simply controlling collusive activity.
Published in The Express Tribune, November 17th, 2013.