Is Pan-Territorial pricing rational?

This study attempts to evaluate the rationale of pan-territorial prices in Tanzania. The main reason of having such pricing system is to bring about equality and an even development of regions, and to bring about efficiency in both production and consumption. There are studies which have been done on pan-territorial pricing system, but all of them centred on agricultural products. They all came out with the conclusion that the intended objectives of the system are not achieved. It is for such reason that this study was conducted to find out the effect of the system on locally manufactured goods. The study analyses also the historical background of National Price Commission (NPC) and its functions. It also discusses the historical background of pan-territorial pricing system and its implications and likely effects on demand, supply and distribution. There are three selected products which are used in this study and they are maize flour (Sembe), beer and cement. They are analysed in four selected regions namely, Dar es Salaam, Dodoma, Kagera and Ruvuma. Qualitative analysis (Theoretical analysis) and statistical analysis have been employed in this study. The empirical findings have shown that distribution of products with pan: territorial prices is concentrated close to production centres and that there is scarcity of such goods in regions which are far from the production points. At the same time there is increasing demand for such products in distant regions but they are not available, hence black market existence. The findings have also shown that people in distant regions do not like using the local products which are close substitutes of the pan- territorial priced goods, hence killing the initiative to improve local production. In fact equity objective is not achieved under the current system and regions which are supposed to be subsidized are not subsidized. The efficiency in terms of substitutability is not achieved either.