Political backing sought to act against sugar and cement cartels

[Naveed Yaseen]

SOHAIL SARFRAZ
ISLAMABAD (October 09 2008): The Competition Commission of Pakistan (CCP) has asked the Economic Co-ordination Committee (ECC) of the Cabinet to provide full political support and backing to prove alleged cartelization in the cement and sugar sectors.

The CCP has submitted a detailed report on the alleged cartelization of cement and sugar sectors to the ECC, requesting for political backing of government to take any action against the un-competitive trade practices in these sectors.

Sources told Business Recorder on Wednesday that the CCP had submitted a detailed report on the cement and sugar sectors to the ECC of the Cabinet. The ECC had asked the CCP to look into the supply and demand of sugar and cement; cartelizations in these sectors and submit viable recommendations.

It is the first report, which has exposed that the government departments themselves are encouraging cartelization in cement sector. It has been confirmed that the CCP report has been received in the Cabinet.

The CCP has informed the ECC that the sugar mills are a powerful political lobby. If the government wanted to take action against un-competitive behaviour of the sugar mills then there is a need of government will and backing for taking such action against these units. Without political support, it is impossible to initiate any action against the most powerful sugar cartel.

The commission has the technical capability of checking cartelization, but due to absence of substantial funding, it could not carry out thorough analysis/research. In the absence of the necessary funding, it would not be possible for the CCP to conduct in-depth research on pricing mechanism etc.

Besides other factors, the commission has informed the ECC that mills are not timely making payments to the growers, which resulted in delays. The data showed that artificial shortage of sugar is also being created in the country. There are visible indications of 'parallel pricing of sugar' in the sector whereas purchase of cane from the growers is being deliberately delayed by the mills to procure the same on nominal prices. The CCP has found that the sugar mills collectively decide prices and all sugar mills give similar treatment to the growers.

To prove this kind of un-competitive behaviour in the sugar sector, the CCP needs budget resources and independent stream of funding to verify such kind of behaviour in the sector. The ECC has also been informed by the CCP about the role of Ministry of Industries and Production in fixation of cement prices.

According to the sources, the CCP has conveyed to the ECC that the government should not do anything, which results in collusive behaviour in cement sector. The CCP was of the view that when Ministry of Industries was in the process of talks with the association concerned about cost and pricing of cement, it would encourage cement manufacturers to collectively fix prices of cement.

This clearly indicates that the government itself is encouraging cartelization of cement. Sources said the government departments meetings with the associations are merely encouraging these units to collectively increase prices of the commodities.

The CCP report has categorically conveyed to the ECC that the government departments should not do anything, which encourages cartelization in cement sector. The anti-competitive behaviour seemed to be encouraged due to such kinds of meetings.

According to sources, Ministry of Industries should encourage implementation of the competition law. The ad hoc measures and short-term thinking to collectively fix prices for government encourage collusive behaviour, which would result in cartelization. Such kinds of meetings actually allow common industry platform for increasing prices of the commodity, the CCP added.

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