ISLAMABAD, Sept 17: The government is reviewing its role in procurement, storage, distribution, import and export and price maintenance with a view to ensure greater participation of the private sector in the business.

Informed sources told Dawn on Monday that official planners had advised the government to carve out its new supervisory role regarding procurement and other issues by clearly stating its objectives and then sticking to them.

However, these planners did not argue that everything should be left to the private sector and that government’s supervisory role must be there to ensure fair business practices relating to procurement, storage, distribution, imports and exports and price maintenance. This area, in most countries, has government involvement but the important issue is predictability.

The government action, official planners said, has to be predictable to allow the private sector narrower hounds on uncertainty when contemplating long-term investment dealing with setting up storage facilities. The government storage facilities needed to be run on corporatised and business oriented basis, with strong performance and outcome based incentives.

Storage of agricultural grains is seen as a key way of maintaining prices of important items like wheat, rice and sugar and storage of cotton is important for both domestic textiles as well as direct and indirect exports.

Similarly, storage of seasonal fruits and vegetables is essential if the country wants to enter processing of such items for paste and juice for domestic and external markets. But this, like storage of meat, meat products, and dairy products requires a cold chain.

Storage and warehousing sector has traditionally been ignored in Pakistan. For most of the country’s history government used to be the almost monopoly buyer for grains and so almost all large scale storage of grain used to be in the public sector.

The government allowed the private sector to enter grain markets a few years ago, but most of the storage continues to be with the public sector still. Fruit and vegetable storage, though in the private sector, was mostly restricted to storage for only short periods needed to transport goods from the farms and orchards to factories and wholesale and retail markets.Storage for industrial, consumer and non-perishable items has mostly been done by individual factories, wholesalers and retailers.

More importantly, conversations with private sector players in the area suggests that it is the unclear and vacillating policies of the government and the provinces that is making private investment in the area difficult. Private sector will enter the grain storage and warehousing area in the hope that it will be able to benefit from higher market prices later.

But if the government decides to enter and exit the market unpredictably, and allows or disallows imports/exports unpredictably, the private sector will be faced with a high level of uncertainty and will not be willing to invest in the area.

If domestic prices are slated to be higher later, private sector would like to store and benefit from the increase expected in prices. But if the government allows imports, when prices start to increase, investors are going to take a loss or not make the level of expected profits.

If investors fear government action, they will not invest in the area in the first place. Similarly, if prices abroad are higher, but the government slaps a ban on exports, the expected profits will not materialise and foresight will lead to lower investments than needed.

The government was told that perishable items, especially fruits and vegetables, require a cold storage chain to extend their life beyond a few days after picking. The cold chain has to include, for some goods, even refrigerated trucks as well.

But even when these are not needed, a cold chain might need to have facilities near main centres from where the fruit and/or vegetable is collected, facilities near factories where processing needs to take place, and facilities near dry and sea ports as well.

The entire cold chain is, therefore, an expensive proposition and would need a fairly high level of bulk and business activity to make sense of the large fixed investment.

In this regard, the planners asked the government to underwrite the initial investments in the creation of cold storage chain, in conjunction with private sector parties willing to invest in fruit and vegetable grading, packaging, and processing facilities.

The government of Punjab has already taken some steps in this direction through the creation of a company, Punjab Agricultural Marketing Company (PAMCO), as a public-private sector initiative. This company has been given the task of developing the cold storage chain as well as facilitating the development of processing of fruits and vegetables, especially for export purposes.

Similar initiatives might be needed in other provinces as well. Storage facilities for retail and wholesale do not seem to have any major regulatory issues attached to them.