Wheat, sugar crisis

Published March 12, 2020

THE government has sort of ‘upgraded’ the inquiry committee created early last month to investigate the severe wheat flour and sugar shortages that surfaced across the country in January and fix responsibility. The committee has been converted into a larger commission with an expanded mandate and more powers to probe the shortages that saw the prices of two essential food items shoot through the roof. The federal cabinet has apparently taken the decision in view of the failure of the committee to satisfactorily complete its assignment even after the passage of more than a month of its constitution. The committee was given two weeks to conclude its investigations and submit its findings to the cabinet for action against those responsible for creating the shortages. According to the interior secretary’s briefing at the cabinet meeting on Tuesday, the investigators have yet to conduct a “forensic audit” of the information and accounts so far gathered to move forward and draw their conclusions and make recommendations.

It is, however, not clear how the conversion of the committee into a commission will help the government determine the real causes of the crises, leading to a spike in overall inflation that has taken a toll especially on the poor and low-income segments of the population and significantly eroded the political capital of the ruling PTI. Nor is it clear as to what factors prevented the committee from successfully wrapping up its inquiry. The commission has been given one week to finish its job by building upon the work already done by the now defunct committee. Many observers believe that the commission, which consists of senior officials from the anti-corruption agencies and corporate regulators, may not be able to finish its work within the stipulated time frame. The sceptics also feel that the government is looking for the cause of the crises in the wrong places because the roots of the issue actually lie in the country’s policies governing these two sectors, and which allow market players to periodically create artificial shortages to rig profits as well as raise their prices.

A number of studies have held the excessive regulatory and financial state interventions in the sugar and wheat markets, in the name of protecting the interests of small-holder farmers and consumers, responsible for the eruption of periodic shortages. These studies have clearly established that government interventions through price-fixing and allocation of massive subsidies across the supply chains every year have distorted the domestic wheat and sugar markets. Government interference in the market has also made these two commodities internationally uncompetitive and created opportunities for large farmers, millers and others involved in the trade to wrench economic rent at the expense of small producers and poor consumers. It is doubtful that the commission will look into faulty government policies and propose meaningful solutions for addressing the market failures.

Published in Dawn, March 12th, 2020

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