House team urges caution in effecting price controls

A parliamentary committee has called for caution as the government gears up to implement the Price Control Act to avoid legal obstacles.

The team recommended repealing a number of laws that allow prices of some of the essential commodities to be regulated by market forces.

The Select Committee on the Cost of Living, led by Budalang’i MP Ababu Namwamba, has further called on the government to also review the price cap policy being implemented by the Energy Regulatory Commission.

These are some of the drastic measures the committee is proposing to help reduce the sky-rocketing cost of living in the country.

In their final report tabled in Parliament on Monday, the committee called for caution while implementing the Act that provides for the regulation of prices of essential commodities.

This is in a bid to forestall market distortions and possible capital flights.

“Emphasis should be placed on making the supply chain of essential goods more efficient, smooth and cost effective,” said the committee in its report.

The Act was initiated by Mathira MP Ephraim Maina, who has warned that he will use the floor of the House to ensure it is implemented if the government drags its feet.

The committee noted that while price controls were a popular subject with wananchi, it was not necessarily a remedy for the high cost of essential commodities.

Fuel price controls were introduced last November amid public outcry over the impact of the rising prices on industries and households.

Perception at the time was that the controls would help the consumer. This, however, has not helped, with the cost of fuel rising every month.

Even though the Act has not yet been implemented, Finance minister Uhuru Kenyatta is expected to walk a tightrope as he juggles between protecting the poor through price caps on basic goods and maintaining the confidence of investors sensitive to free market economy conditions.

President Kibaki assented to the law in September. This authorised the Finance minister to declare any goods to be essential from time to time through a Kenya Gazette notice and determine their maximum prices in consultation with industry players.

Prices of basic staple foodstuff like maize flour, rice and sugar have gone through the roof, making it impossible for many families to manage even a single meal a day.

The rise in the prices of food and fuel has pushed inflation up for 11 months in a row to settle at about 18.91 per cent last month.

In the report, the committee has also proposed a social welfare programme be established to cushion the most vulnerable segments of the population most affected by poverty like the urban poor, the aged and the unemployed.

Meal voucher system

“This should include the establishment of a meal voucher system for the urban poor and a cash transfer system where funds are dispatched to people above the age of 65,” says the report.

And to ensure that all Kenyans have access to medical care, the committee wants the government to implement a social health insurance scheme that it has developed.

This should be implemented by the National Hospital Insurance Fund (NHIF) as it has sufficient capacity to manage it.

Regarding the agricultural sector, it has asked the government to build dams in the grain-growing areas of the country to facilitate irrigated farming and ensure food security throughout the year.

“The government should ensure that in the long term, the country produces food sufficient to feed its people and ceases to be a net importer of food as is the case today,” the committee proposes.

Demoralising factor

It should also enhance the Strategic Grain Reserves from three million bags of maize to eight million bags to cushion the country during periods of supply shortages.

The National Cereals and Produce Board (NCPB) should pay farmers on delivery since pricing and payment delays were a major demoralising factor that has largely lowered production in traditional grain-growing areas.

“To reduce post-harvest losses to farmers as a result of high moisture content and poor weather during the harvest season, the NCPB should make its stores available to farmers for drying their harvest and storage of the same at a minimal fee,” the committee has recommended.

“They should also explore the viability of reviving the National Milling Corporation as a strategic national asset to address deliberate market distortions by unscrupulous millers,” say the MPs.

Agri-insurance scheme

They should also enact legislation to establish a special agri-insurance scheme that compensates farmers for losses incurred as a result of crop and livestock failure due to drought or disease to encourage farming.

In the sugar sub-sector, the committee has recommended an overhaul of the Sugar Act and strengthening of the Kenya Sugar Board so that it effectively plays its role as a regulator.

The government has also been urged to implement the report of the Task Force on the Restoration of the Mau Forest, urgently address gross labour abuses in low-cadre employment sectors, write off Agricultural Finance Corporation’s bad debts and explore ways of addressing the escalation in rents.