CCP issues opinion on competition concerns in the sugar sector of Pakistan

KARACHI: The Competition Commission of Pakistan (CCP) has recommended measures to the federal and provincial governments for making the sugar industry more efficient, improve sugarcane quality, enhance and diversify production processes, and focus on export competitiveness.

Taking notice of the sugarcane procurement crisis, the CCP held an open hearing on January 25, 2018, providing a platform to all stakeholders including representatives of the federal and provincial governments, growers, millers, retailers, distributors and consumers to express their concerns.

In its opinion following the open hearing, the CCP recommended that the federal government abolish the price floor/support price of sugarcane and let the market determine the price based on supply and demand. However, if sugarcane price needs to be set, it should be based on independent and reliable data, taking stock of divergent conditions and factors prevalent in different areas, and consider any applicable support price of other crops such as cotton. More importantly, where support prices are set, the government must act as an underwriter and ensure complete and timely payments to the farmers.

The commission has recommended that quality considerations should determine any support price, rather than weight. Farmers who produce higher quality sugarcane should be paid a premium compared to those farmers whose cane is of lower quality. The government should also encourage and take research and development (R&D) initiatives to reduce the cost of producing sugarcane and increase its quality.

The commission has also said that millers should make their processes more efficient with incentives that encourage the optimal use of their by-products and reduce the overall cost of sugar production. This will help make them internationally competitive and enable them to make timely payments to farmers.

The commission recommended that provincial governments review the legislative framework encourage open competition in the sugar sector.

To control price hikes of sugar at the retail/wholesale level, the CCP recommends that the Trading Corporation of Pakistan (TCP) keep a minimum reserve of sugar to address any unanticipated fluctuations in demand or any emergency. However, this measure should only be used sparingly as it could affect the free market mechanism.

The CCP also recommended that the relevant government departments should be cognizant of the sugar supply situation at all times. This will help Pakistan take advantage of any export opportunities when they arise and the necessary measures for this purpose are done on time.

Lastly, the commission recommended that a committee comprising representatives of all stakeholders, including government departments dealing with the sugar sector at the federal/provincial level, be constituted to discuss ways and means of implementing the recommendations made in the opinion.

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