Grains Commission needs urgent facelift, says departing vice chairman
The Deputy Chairman of the Cyprus Grains Commission, established in 1960 as a state-controlled monopoly to ensure low prices for grain imports and maintain the country’s strategic reserves, resigned this week, but urged the government to restructure it and make it more competitive to benefit farmers and consumers.
In his resignation letter submitted last Wednesday on the grounds of increased professional commitments, Alexis Tsielepis said that he worked hard during the past 13 months, despite the numerous interventions and undermining of the Commission’s work. His conclusions are that the state should get more involved and make the Commission more competitive to keep grain prices at low levels and to ensure the uninterrupted supply both to farmers and to households.
Numbering the problems at the Commission, Tsielepis noted that those in key positions did not work in a proper manner to face the problems, but with the blessing of past governments “kept the ship afloat, with the hope that it would someday reach a safe port and not sink.”
“There is no free competition in the grains market, as evidenced from the shortfalls in the CGC’s stores. Until the next shipment is received, competitors take advantage and hike prices. There seems to be some collusion, a cartel even.”
But Tsielepis said that the biggest problem was Commission’s high operational cost.
“Using simple math, the CGC needs to at 25 euros a tonne to its buying price to cover wages. Of these, 16 euros go direct
the to the payroll. If the CGC’s competitors need a 5-6 euro margin to cover their own costs, instead of adding a reasonable profit margin and selling their grains at 8 to 10 euros a tonne, they sell 16 or 18 euros a tonne, thus making super profits and still appearing more competitive than the CGC prices. In other words, through its high payroll, the CGC is contributing to maintaining prices at high levels, with the whole of Cyprus burdened with higher prices for bread, milk, souvlaki, halloumi, etc.”
Tsielepis said that there is a need for a competitive grain’s commission, but based on new foundations, and not necessarily shutting it down or privatising it, as some part of the media have suggested.
“I am convinced that if the CGC closes down, the market will become an oligopoly by some suppliers who will continue to impose cartel conditions, with prices continuing to rise, as a result,” he said, adding this would impact the consumer basket by raising the prices of bread and any flour-based goods, as well as dairy products and meat.”
The “provocative salaries” that some refer to as an excuse to shut down the CGC are no different from the admittedly high wages in the public sector, while the idea to change the CGC’s role to that of a regulator has a real risk of failure, as is the case of other regulators, Tsielepis said.
He explained that according to the plan, the CGC would maintain its strategic silo in Limassol and establish a new CGC commercial enterprise, both state-owned.