Lawsuit Against Pakistan Flour Mills Association (PFMA)
Lawsuit Against Pakistan Flour Mills Association (PFMA): Competition Commission of Pakistan (CCP) last month started a case against the wheat flour industry and legal proceedings against Pakistan Flour Mills Association (PFMA) are under process. The reason claimed by CCP is that PFMA is indulged in price fixing and sharing commercially sensitive information which is a violation of Pakistan’s Competition Law. CCP appears to have come across a new association in the wheat flour industry.
Currently, there is a daily 280,000 tons installed capacity of producing flour across the country, whereas the daily demand is 40,000 tons, so many mills are not in production. . The provincial district food controller is mandated to communicate the government set maximum prices to the flour mills.
The Inquiry Report by CCP states that
- PFMA has, on several counts from time to time and continuously, violated Section 4 of the Competition Act 2010.
- It appears that the anti-competitive practices adopted by PFMA and endorsed by its member undertakings have violated Section 4(1) read with Section 4(2)(a) and Section 4(2)(b) of the Act.
- A single instance of price fixing or production limitation or distribution, is sufficient to constitute a violation of Section 4 of the Act.
- Between 2015 and 2016, the Cartel and Trade Abuses (C&TA) Department of the Commission noticed several news items appearing in different newspapers suggesting an unusual hike in the prices of wheat flour on a regular basis across Pakistan.
- PFMA has 1,171 member’s nationwide, comprising individual flour mills and has provincial chapters in all four provinces. The central office of PFMA is located in Lahore.
- PFMA had engaged in fixing and communicating the price of flour to its member millers in Punjab. The CCP also tracked SMS messages sent by PFMA management to its members conveying the prices at which wheat flour had to be sold.
Seeing its role in price fixing, the CCP teams had also raided the office of PFMA in Lahore and seized relevant documents. On recommendation of inquiry report the Competition Commission of Pakistan (CCP) has issued Show Cause Notice to Pakistan Flour Mills Association (PFMA) in March this year.
The inquiry report has recommended initiating proceedings against PFMA and its member undertakings for prima facie violation of Section 4 of the Act under section 30. The court stated that flour association will be given full opportunity of hearings and the CCP bench will pass an order after that.
While yesterday Pakistan Flour Mills Association (PFMA) has called for establishment of “Wheat Board” for determination of wheat prices with respect to international prices. They claimed that since February 2017 those flour mills who export wheat products are facing severe financial crisis due to non-payment of rebate amount despite requests made by Food Department and State Bank of Pakistan and demanded that the issuance of notices by income tax department should be stopped as the millers are paying due taxes despite prevailing financial crisis.
PFMA said that the government was buying wheat in the current wheat procurement season at Rs 1,300 per maund while it would be releasing wheat from the stores to the flour mills at Rs 800 per maund. The difference of Rs 500 per maund will increase the chances of corruption in the subsidy amount. Flour millers urged the government to not include flour in the upcoming Ramzan Package as subsidy given on it only benefits certain people instead of the consumers.
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