ISLAMABAD: The Competition Commission of Pakistan (CCP) has concluded an inquiry in the dairy sector which has found three leading dairy associations involved in cartelisation and price-fixing of milk in the country’s largest metropolitan, Karachi.
The CCP initiated the enquiry after taking notice of media reports and concerns raised by a consumer association against the rise in the price of milk in Karachi and its adjacent areas by dairy associations at farm, wholesale and retail levels.
Official data shows that the notified prices are not adhered to mainly due to the role of various associations involved in the milk supply chain.
It was stated that the Dairy Farmers Association (DFA) Karachi had raised the price of milk from Rs110 per litre to Rs120 per litre with immediate effect, whereas, the official government rate was Rs94 per litre. The vast price gap meant that the consumers of Karachi and adjacent areas had to bear a burden of Rs47 billion on an annual basis.
According to officials, the milk sellers collectively pocketed more than Rs47 billion from the consumers of Karachi and its adjacent areas in a year. On the other hand, the market was distorted as there was no competition on prices and consumers were made to pay unfair prices irrespective of the quality of milk.
“Milk was an essential commodity and a key ingredient in desi ghee, butter, cheese, a variety of confectionaries, and several cosmetics. A change in the price of milk affects the prices of all these and other products throughout the country,” the CCP noted.
The analysis of Karachi’s milk sector revealed that fresh milk in the city is supplied by five cattle colonies located on the outskirts of the city. The supply chain of milk consists of dairy farmers, wholesalers, and retailers, where milk is sold to retailers through an annual contract called ‘bandhi’ in which the rate and quantity for purchase of milk is fixed by various dairy and retailer associations. Karachi is also unique in the sense that milk in the city can also be purchased from a mandi, located at Bolton market.
There are three dairy farmers’ associations in Karachi including the DCFAK, DFAK and KDFA.
In February 2021, videos of DCFAK representatives were shared announcing revised prices of milk in Karachi. This was followed by the DCFAK president appearing on various TV programmes stating that milk in Karachi would not be available to consumers at the old rate. Price data shows that prices of milk in Karachi rose immediately after the rate announcement by the DCFAK.
In July 2020, milk prices rose from an average of Rs110 per litre to Rs120 per litre and in March 2021 prices rose from Rs120 to Rs130 per litre.
A city-wise comparison among Karachi, Lahore and Islamabad-Rawalpindi shows that only Karachi has a uniform milk price, whereas the prices vary in all other cities. Such uniformity in prices also points towards rate fixation by the various dairy associations.
Therefore, these decisions to fix the rate of bandhi in the relevant market is a prima facie, violation of Section 4 of the Competition Act 2010.
In light of the findings, the inquiry committee recommended the Karachi commission to consider initiating proceedings under Section 30 of the Act against DCFAK, DFAK and KDFA. “The decision to fix the rate of bandhi in the relevant market is a prima facie, violation of Section 4 of the Competition Act 2010, and the Commission has decided to initiating proceedings under Section 30 of the Act against the Dairy & Cattle Farmers Association Karachi (DCFAK), Dairy Farmers Association Karachi (DFAK) and the Karachi Dairy Farmers Association (KDFA),” the CCP said.
