July 16, 2007	Monday	Jamadi-us-Sani 30, 1428

As the harvesting of three main kharif crops — sugar cane, cotton and rice — draws closer, it begins to unravel the conflict of interest between growers and the industry. And somehow, the ultimate victims of this conflict are the consumers who end up paying higher prices and suffer from scarcity of essential items like sugar, flour and vegetable ghee.

The main players in the industrial sector are sugar factories, textile mills and traders who want sugar cane, cotton and rice respectively, at the lowest possible price. With the change in political and market environment growers too, particularly in Central Punjab, have much better access to bank credit and have developed a holding capacity that can withstand pressures of the urban-based trade and industry. But the poor consumer does not have any lobby.

The government's explanation for back-breaking prices is that, `excessive liquidity and rising commodity prices are a global phenomenon'' . A senior official in the state-run National Bank of Pakistan explains that Pakistan cannot remain immune from this global trend.. But then how come India maintains a manageable inflation along with a high growth rate? China, by and large, also remains immune from high inflationary trends. Saudi Arabia and UAE have maintained stable prices of a selected list of large number of essential items for last more than two decades. No plausible answer is available on these questions from anyone in the government.

In the last five years, the conflict of interests between growers and industry has not been handled in a prudent way, often creating wide fluctuations in prices of essential commodities. The consumer has been left at the mercy of an undisciplined market.

More vulnerable are the low income groups living on the lowest fixed income that is Rs4,600 a month. Imagine the plight of a primary school teacher, a peon, a clerk in a private or government office or other low grade employees who have to pay Rs80 on a kg of vegetable ghee as against Rs54 about five years ago.

As the number of milk plants increases, the price of packed and branded milk goes up and so does the cost of fresh milk. Fresh milk is being sold at Rs34 a litre instead of Rs22 in 2003. Sugar prices have gone up to Rs36 from Rs22 a kg. Even the price of broken rice is between Rs35-40 a kilo. The wheat flour, after a record crop this spring is Rs18 a kilo whereas it was Rs8 a kilo in 2003. Beef is being sold at Rs190 a kg and mutton Rs260 a kg. Quite a few vegetables are not available at less than Rs70 or Rs80 per kilo.

Pakistan Sugar Mills Association (PSMA) announced last week to delay crushing beyond November 2007 to January 2008. The sugar season should normally start from November when sugar cane is ready for harvest. The argument offered by the powerful PSMA---it is powerful because millers are there in the federal and provincial cabinets, the central and provincial legislatures and in the ruling and opposition political parties--is that there is a carry-over stock of more than one million tons from the previous season. This stock, millers say, is sufficient to meet three months requirement-- from November 07 to January 08.

In actual fact, indications are that they want the government to bring down sugar cane price to Rs40 a maund from Rs60 in Punjab and to Rs67 a maund in Sindh prevailing last season. Delaying crushing for three months is meant to bring growers under pressure. The growers have reacted instantly. The Punjab-based Pakistan Kisan Movement (PKM) has expressed concern on continuing deadlock on payments from millers on last season's sugar cane procurement. The stuck up payment is said to be in billions of rupees and the PKM has threatened to take to streets.

As millers and growers prepare for a showdown in the coming weeks, there are fears in the market about sugar prices going up. There is some talk of government considering import of sugar. The traders who thrive on distress imports and exports are said to be in touch with the world food companies to supply. But the consumers are bound to end up paying more on sugar-- may be even more than Rs40 a kg during this Ramzan.

Vegetable ghee and cooking oil are being sold between Rs75--80 because the government is not ready to offer any concession on about Rs35--40 billion taxes being collected from the vegetable ghee industry, even though palm oil prices in the world market have shot up to more than $800 a ton from $462 dollars a tons only a year ago.

“We are ready to offer tax relief to the industry if ghee manufacturers assure us to pass on this benefit at the same scale to the consumers'', the Federal Minister of Industries, Production and Special Initiative Jehangir Tareen informed Dawn over telephone from Islamabad.

“The government duties and taxes constitute almost 44 per cent of the landed cost of imported palm oil which is highest in the world on any food item,'' Sheikh Amjad Rasheed, chairman of Pakistan Vegetable Ghee Manufacturers Association (PVMA) said.

In its pre-budget proposals, the PVMA suggested to substitute a fixed customs duty with a regulatory duty on import of palm oil which could be increased or reduced with change in world prices. It was also a practice in the past and worked well. But the government and the industry are stuck up in a blind alley and consumers suffer, as within a short span of a year, the prices of vegetable ghee has gone up from Rs60 to Rs80 a kilo.

Much before the commencement of cotton season in September next, the textile industry leaders have started demanding a two years moratorium on debt servicing of bank loans (more than Rs350 billion) as they fear default by 80 per cent textiles in days to come. The economic pressures have brought about a split in All Pakistan Textile Mills Association.

A new group All Pakistan Textiles Association (APTA) has been set up as there was a belief that APTMA was serving the interest of about 15 top textile groups only. This is an in-house dispute in the textile industry.

The conflict of interest among various economic agents needs to resolved with wisdom and prudently so that the industry, the growers and the consumers benefit equitably. No official mechanism has been set in place to resolve such conflicts of interest. There is no department of internal trade and commerce at the federal or the provincial level to deal with such issues before they become major problems. It is not realised that resolution of such conflicts of interest is an important part of economic policymaking.