IN an unprecedented move, the National Assembly’s standing committee on industries has directly sent a three-year-old sugar subsidy case to the National Accountability Bureau for investigation, ignoring the decisions of the ministries of industries and commerce and the Economic Coordination Committee of the cabinet.

In November, 2012, the ECC had given permission for export of sugar as the prices in the international market were on decline and there were abundant sugar stocks. Later, the ECC in its meeting on March 6, 2013 approved an inland subsidy of Rs 1.75 per kg on 1.2m tonnes of sugar and Re1 per kg on 0.5m tonnes.

However, no subsidy has been disbursed among exporters so far although 4,966 claims have been submitted. The NA standing committee on industries maintains that it sought information on sugar subsidy from the relevant ministries but was not provided the required information.

The summaries for the subsidy were prepared by the commerce ministry and the FBR. However, an SRO issued by the FBR favoured only sugar mills of Sindh zone. The FBR says that while submitting summary for the ECC, a draft of an SRO was annexed with the note for the finance minister. While approving the summary, the minister also approved the draft SRO containing the condition that this facility shall not be admissible in respect of exports by land routes to Central Asia and Afghanistan.

No subsidy has been disbursed among exporters so far although 4,966 claims have been submitted. The NA standing committee on industries maintains that it sought information on sugar subsidy from the relevant ministries but was not provided the required information

The NA standing committee headed by Asad Umar had declared the subsidy ‘unjustified’ for it provided benefits to the sugar millers only and not the farmers, and asked the ministry of industries and production (MoI&P) and the ministry of commerce, either of the two, to refer the matter to NAB to find out the basis on which the subsidy was fixed. But both the ministries refused to do so. The MoI&P said it would not send the case of subsidy directly to NAB. Instead, it would hand over the matter to the commerce ministry because the latter had moved the summaries to the ECC.

Commerce ministry said that no action as such has been taken by it because the reference to the NAB, if at all, is to be made by it and not by the standing committee. But Additional Director, NAB, Asim Lodhi, informed the committee meeting held on May 8, 2015 that NAB treats the instructions of public accounts committee and standing committees as executive orders and that the sugar subsidy case can be submitted to NAB for probe by the standing committee. His statement was convincing enough for the NA panel chairman to go ahead with his plans. The Asad Umar committee then decided to send the case itself to NAB which was done on May 19.

One may recall that on April 17, 2014, he had threatened to go to the court if no action was taken against those involved in the sugar subsidy ‘scam’. There was no progress in his campaign following resignation of many including him from membership of the National Assembly. The committee is active again in the wake of withdrawal of resignations.

The sugar lobby which exercises great political influence features the two houses of parliament. The ECC, under the leadership of finance ministers Dr Hafeez Sheikh and later Saleem Mandviwalla in the previous government, had approved lucrative financial incentives for the sugar industry through the Federal Board of Revenue (FBR) and commerce ministry with the consent of the ministry of industries.

The present federal government which has most of its supporters in Punjab had no hesitation in backing the grant of subsidy on sugar exports by the previous administration although the subsidy provides benefits only to the millers in Sindh and not their counterparts in Punjab and KP. This amounted to discrimination and displeased the millers in Punjab and KP. As a result, some leading sugar millers of Punjab and KP challenged the decision in the Lahore High Court. The court simply advised them to seek clarification from the Economic Coordination Committee (ECC) whether the subsidy was in conformity with the decision of the committee or not. Commerce Minister Engineer Khurram Dastgir had also investigated ‘sugar subsidy scam’ during the PPP-led coalition government.

According to the FBR, exports to Afghanistan and via Afghanistan to the Central Asian republics are regulated by the Export Policy Order 2009 which envisages that exports should be allowed via land route against Pakistani rupees. To be precise, the purpose of granting concession for sugar exports was to realise revenues in foreign exchange The. Economic Coordination Committee (ECC) of the cabinet has endorsed the viewpoint of FBR regarding non-availability of incentives on sugar exports to Afghanistan.

Meanwhile, the Punjab zone of the Pakistan Sugar Mills Association has appreciated the Sindh High Court’s decision to protect the growers’ interest. Sindh government, it said, after the court’s decision is paying Rs12 per maund to sugarcane growers as its contribution. The Punjab government should also lower the price of sugarcane to safeguard the growers’ interests.

Published in Dawn, Economic & Business, June 1st, 2015

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