Monday, October 25, 2021

Getting fleeced by middlemen

LAHORE: The government should adopt the carrot and stick policy to boost industry. Facilitations must be subjected to address the inefficient ways our private sector generally operates.

The government for instance subsidises power and gas for exporters on currently installed inefficient machines without pressing them to upgrade technology. It is indeed regrettable that 90 percent of the industry in the country is operating without an internal energy audit.

The small and cottage industries use locally made motors with cheap non-copper wires that consume more power than pure copper wires. Since they operate in limited space, the machines needing heat and those that operate at low temperature are installed side by side.

Both machines consume higher energy as the one needing heat is cooled by the machine operating on lower temperature. Similarly, the low temperature machine would need more energy to bring the temperature down. Small industries are unable to compete because of extraordinary use of energy.

Even the larger mills are reluctant to improve their energy efficiency as it involves some investment to correct the flaws. In spinning for instance, most of the installed spindles consume 40 percent higher power than the new high-tech spindles.

Very few large manufacturers have added the efficient spindles. Still even they are also operating on older inefficient spindles that are more in number.

The small spinners simply do not have the resources to upgrade and operate on older spindles.

The government subsidy to these mills does not cover the inefficiencies of their machines.

They would only survive on subsidised power until they are forced to shift to new technology. They are looking towards the government to facilitate them in this regard by sharing the burden of new investment.

It is true that the cost of production in Pakistan is higher than in regional economies. But there are practices in the private sector that have got nothing to do with cost.

If we look at the labelling of our packed daily use items, the ingredients are not mentioned. Labels on all imported daily use items have all the ingredients clearly mentioned on the packing.

Then expiry date is mentioned even on toilet soaps. All types of toothpastes have an expiry date. The manufacturing and expiry date is mentioned on each edible packed item.

This includes jams, marmalade, pickles, sauces, drinks, juices, custard, jelly, chocolate, wheat flour and its preparations, edible oil, butter, biscuits, rice, sweets, potato chips and even frozen meat or any item that is consumed by a human being or even pets.

Labels clearly mention that only food colours have been used in the preparation. Our entrepreneurs take labelling issues lightly although the law mandates that labels should contain all the information about the product even its possible side effects.

The government should give a deadline of six months in this regard after which items without mandatory label information should be confiscated. This is in supreme consumer interest.

Rates of edible items remain a threat for the existence of each government. Private sector leaves no money trail of agricultural produce bought locally. Farmers are dismayed when they find that a commodity bought from them at Rs10 per kg is sold in the cities one day later at Rs100 per kg.

These commodities provide farmers billions of rupees, but for each billion rupee the farmers get the middlemen earns Rs10 billion by the time the commodity is retailed. The government would have to use prudent and even unconventional methods to keep the rates of edible food stable. It could be done by checking on the role of middlemen.

How would a carmaker feel if it sells a car to its dealer (middleman) at Rs1 million and that is retailed at Rs10 million? This is not possible in industries where the producers are more powerful than buyers.

But in agriculture the farmers are mostly poor and have no influence. They are easily fleeced by powerful middlemen. The government would have to exert its writ on commodity trade to ensure smooth supplies at reasonable rates.

One mistake that every government in Pakistan commits is to increase the yearly expenditure more than the taxes it could collect. This way the budget deficit continues to widen.

Another thing worth noting in this regard is that almost all the resources that the state generates in a new year are spent on increase in non-development expenditure (in fact no development expenditure increases more than imposed taxes).

The country would move forward only if it is principally decided that the non-development expenses would remain stagnant and all resources generated through new taxes would be consumed for infrastructure development.

Source: The News

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