Revelations of sugar scandal report

Living up to his word, Prime Minister Imran Khan shared the details of the FIA-led sugar crisis inquiry commission’s forensic report — a damning document that outlines a series of misdeeds by sugar mill owners.

His close aide Jahangir Tareen and allied partner from PML-Q Moonis Elahi, Omar Sheharyar, Omni Group, and Sharif Group have been blamed for committing corporate frauds.

The alleged fraudulent activities include fudging the production cost to claim subsidies, manipulating the market, underreporting their sales, committing fraud, and exploiting farmers.

Let’s look at different facts regarding the sugar crisis and the report.

Importance and history of sugar industry in country

The sugar industry has always played an important role in the Pakistani economy. It is considered to be the second largest industry in the country after textile and has been operating since the independence of Pakistan.

In 1947, Pakistan had only 2 sugar mills that could not meet the needs of the country, after which Pakistan started importing sugar which put an undue burden on the national exchequer.

Pakistan soon realized the importance of sugar production in the country. Recognizing the importance of sugar, the government set up a commission in 1957 with the task of formulating a scheme to develop the sugar industry.

The first sugar mill was set up in Tando Muhammad Khan area of Sindh in 1961, after which industrialists and politicians across the country also started setting up sugar mills. As of 2002, there were 76 sugar mills in Pakistan, which are now about 90.

The report

The commission’s report, which had already been discussed by the federal cabinet earlier today, revealed that six major sugar mill groups were acting as “cartels”. The sugar barons raked in a “windfall profit” of Rs100 billion during the sugar crisis this year alone.

The stakeholders of the mills involved in wrongdoing include PTI leader Jahangir Tareen, PML-Q’s Moonis Elahi, PML-N President Shehbaz Sharif’s son Salman Shehbaz, Federal Minister Khusro Bakhtiar’s relative Omar Shehryar and the Omni Group.

A commission was set up in the backdrop of a cycle of sugar price hike from December 2018 to August 2019 during which rates of the sweetener went up by 33% or Rs 17 per kg, and then went on to increase this year as well.

The report also revealed that sugar mill owners paid far less to sugarcane growers than the price fixed by the government and showed a higher price in their invoices.

“Sugar mills records show that they bought sugarcane from growers at a price less than Rs 140 up till 2019 and then continued to buy at a cheaper rate when the government fixed the price at Rs 190,” the report added.

Some sugar mills also hand over handwritten, unofficial receipts to the farmers instead of issuing a computerised payment receipt (CPR). In 2017-18, the sugar mills determined their cost of production at Rs 51 per kg but the forensic report estimated it at Rs 38 per kg.

Similarly, the sugar mills associations determined the price at Rs52.6 per kg while according to the report it should have been Rs 40 per kg. In 2019-20, the price determined by the mills was Rs 62 against the rate of Rs46.4 estimated by the commission.

The report had disclosed that in the last five years, the sugar industry was granted Rs29 billion in subsidies but they paid Rs22 billion in income tax and the refunds they claimed were Rs12 billion.

Loss to sugarcane grower

It seems that sugar was sold at a high price, which affected only the consumers of sugar, but this crisis is not so small, its real story begins in the fields.

The looting of the sugar mill mafia begins with the oppression of the poor farmer who grows sugarcane. Sugar mills owners unnecessarily harass farmers in order to buy sugarcane at cheap rates.

The farmer is forced to sell sugarcane at cheaper prices because of the sugarcane is not sold on time, it can dry up, deteriorate and its price goes down anyway over time.   

Solution

In order to protect the farmers, the government should address their problems as soon as possible and should make rules for the sugar mill mafia. By this, the mafia would not be able to artificially lowering the price of sugarcane and increasing the price of sugar.

On the other hand, it is the responsibility of the government to curb hoardings that create artificial inflation, which requires deviating government policies and legislation.  

Artificial inflation is a bigger problem than the sugar mill mafia as it affects the prices of essential commodities, including sugar as well as wheat, fruits and vegetables. The law should prescribe severe punishment for hoarders so that no one can commit this crime.