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CCI to conduct market specific study to understand the dynamics of key sectors

03 Jun 2011 Evaluate

The competition watchdog CCI (Competition Commission of India) is going to study key sectors like agriculture, steel and paper after conducting similar study in aviation and cement industry. The CCI will conduct market specific study to understand the dynamics of market and how to improve the efficiency in the sectors and also to identify the reason why some of the products prices are volatile in the commodity market.

The CCI has decided to undertake detailed studies on these sectors to ensure that there are no distortions in pricing and the end consumer is not impacted in any way. Prices of the agricultural commodities are more volatile than those of the non-farm commodities due to their low price elasticity and income elasticity and inherently unstable agricultural production due to risk and exogenous shocks,' said the CCI chairman Dhanendra Kumar.

The study on “market structures for agricultural commodities in India” (with particular focus on onion markets) will be conducted by Institute of Social and Economic Change. The study is likely to complete in 45 days. The study aims to understand the supply side dynamics for selected agriculture commodities, the structure, degree and nature of market competition at each stage of supply chain, functions of mandies, process of price discovery and identification of competition and efficiency bottlenecks. The spurt in food inflation in recent months had brought into focus the critical issues of price volatility in agricultural commodities, agricultural market structures and market efficiency, CCI said.

In recent time, the surge in agriculture commodities prices had attracted the attention of competition watchdog as the prices movements were not affected by the market fundamentals of demand and supply. And there was urgent need to understand the market mechanism of agriculture sector in order to keep an eye on food inflation, which was in two digits till March 2011. Food inflation accounts for 15% in the wholesale price index (WPI).

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