KUALA LUMPUR – The government should closely monitor the production, supply, wholesale, and retail distribution systems to ensure there are no bottlenecks or profiteering in the market following the discontinuation of the chicken subsidy tomorrow.
Prof Yeah Kim Leng, an economics professor at Sunway University, suggested that the government promote agro-bazaars, Rahmah stores, and retail outlets to avoid localised shortages and ensure that prices are affordable to low-income groups.
“Where price increases are justifiable, it is appropriate for the government to provide cash aid for low-income households to mitigate the rise in living costs.
“It is heartening to note that industry players have given their commitment that there will be adequate supply and price increases will be fair and not too drastic,” he said.
He said ensuring competition and promoting greater economies of scale and higher efficiency and productivity among producers and suppliers is key to cheaper chicken and egg prices for consumers.
However, Yeah said since the poultry industry and overall supply and demand will be driven by market forces, consumers should expect market prices to fluctuate like other consumer goods and services in a market economy.
He said producers will be motivated to produce more in response to higher prices, and the increased supply and competition will help lower prices.
“In short, government subsidies have done their job of stabilising prices. By allowing prices to adjust freely, the poultry firms will be able to cope with normal fluctuations in input costs and adjust production and selling prices according to market demand and supply,” he added.
Aside from burdening the government and taxpayers, he said, prolonged subsidies inevitably result in industry inefficiencies, over or underproduction and consumption, and undesirable behaviour, such as hoarding and smuggling.
As announced by Agriculture and Food Security Minister Datuk Seri Mohamad Sabu yesterday, the government has agreed that subsidies and price controls on chicken will be discontinued tomorrow.
Mohamad said the government has allocated RM3.8 billion in subsidies to cover the costs of chicken and eggs since February 2022.
He said the rationale for ending subsidies in bulk for chicken is to reduce leakages of subsidies, which are also enjoyed by foreigners and high-income groups.
Mohamad explained that the termination of chicken subsidies also took into account the current supply and price trends, with farm prices and production costs beginning to stabilise, leading to the current market prices being below the ceiling price.
In this regard, he said the government would ensure the sale price of chicken, once floated, remains at a reasonable rate.
Prof Mohd Nazari Ismail, honorary professor at the Faculty of Business and Economics at Universiti Malaya, believes that the measures taken by the government are necessary to reduce the financial burden.
The government had to borrow money and pay interest on the loan to cover the chicken subsidy, which ultimately burdened the people, he added. – October 31, 2023