Deregulation of Sugar, Wheat Markets: FPCCI

LAHORE:

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

FPCCI Agriculture Committee Chairman Ahmad Jawad highlighted the government’s possible plan to scrap sugarcane indicative prices as part of a broader effort to deregulate the sugar sector. Jawad noted that since only Punjab and Sindh currently impose price caps, deregulation may push sugar sales to other provinces where prices are not regulated, potentially leading to higher market prices.

The panel warned that while price controls may provide temporary relief for consumers, they could lead to larger price increases once the controls are lifted as businesses seek to recoup losses, potentially fueling inflation. “Rapid inflation is always a concern for consumers, whom price controls are meant to protect,” Jawad said.

He added that price controls may also encourage hoarding by suppliers and panic buying by consumers, particularly ahead of Ramadan, leading to shortages and even higher prices. The administrative cost of implementing price controls further burdens the economy, he explained.

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

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

Citing an example from last year’s wheat procurement by PASSCO, Jawad disclosed that complaints were received about officials issuing gunny bags to middlemen instead of farmers, resulting in farmers suffering. He questioned the necessity of importing $1.1 billion of wheat when Pakistan was expected to have a good harvest, characterizing the crisis as 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 key cash crops. Jawad concluded, “In a fair market, the farmer wins – without cultivation, the millers cannot operate.”