ISLAMABAD: Despite being an essential sector, the wheat flour trade remains largely un-documented and informal while promoting unfair competition, a draft study by the Competition Commission of Pakistan (CCP) highlights.

The wheat flour sector further restricts competition based on investment, innovative branding, quality improvement and social protection, the CCP noted while soliciting public feedback on the draft study.

According to the CCP document, ‘roti /chapati’ are traditional flatbreads made with wheat flour and are a major part of Pakistani diet. The average monthly consumption expenditure on wheat and wheat flour is 13 per cent out of 17pc on cereals.

“Wheat has a high weight in the average household budget. This makes wheat flour a sensitive commodity, price changes and availability has positive or negative impact on consumers, especially on the poor sections of the community,” the CCP study notes.

At the same time the demand was growing for food items, which have some form of wheat flour such as baked breads, cereals, cookies, cakes, crackers, pasta, macaroni, etc.

It added that Pakistan Standards and Quality Control Authority has not devised a standard for wheat flour.

The CCP said that though wheat flour chain apparently seems to be a heavily competitive industry, but market activities indicate possible anti-competitive conduct that a trade association must avoid.

“In a competitive market-based economy, the trade associations are an important stakeholder –the members of associations suffer due to price-fixing of intermediate inputs or face predatory pricing, boycott, etc,” the CCP said.

Therefore, the trade associations can provide useful information about anti-competitive activities to the competition agency.

“At associations meetings and gatherings, a conscious attempt should be made to refrain from discussion of sensitive issues which eventually lead to cartel formation,” the CCP said.

The CCP said the government should not involve in price negotiation with Pakistan Flour Mills Association (PFMA), and should fix price of this essential commodity based on independent analysis of market situation.

The PFMA is a registered representative trade body of flour milling industry in Pakistan. It has grown substantially over a period of five years from 915 mills in 2013, to 1,171 in 2019.

The study said that a review of the regulatory framework indicates that the present system of wheat procurement and quota has generated excess production capacity and ‘ghost mills’ have propped – which are actually not in production but sell their allocated government wheat quota to other mills.

The CCP noted that the system is expensive and has inefficiencies, as a result its positive impact for both farmers and consumers — for whom the whole system was designed — is questionable in present day circumstances.

The CCP suggested that the outdated laws and rules made to control production and distribution do not facilitate and encourage establishment of modern mills, branding and marketing nor can optimise the role of the private sector engaged in flour milling.

Published in Dawn, July 28th, 2019