Sugar probe report again puts blame on key politicians

Updated May 22, 2020

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According to findings, mill owners and associates took yearly benefit of Rs100-Rs150bn. — AFP/File
According to findings, mill owners and associates took yearly benefit of Rs100-Rs150bn. — AFP/File

• According to findings, mill owners and associates took yearly benefit of Rs100-Rs150bn
• Export was not justified due to expected lower output
• Six groups found main beneficiaries of manipulation
• Sugar barons always kept two record books
• PM to decide course of action after Eid

ISLAMABAD: The government on Thursday made public the much-awaited sugar commission’s inquiry report that exposed multiple wrongdoings within the sugar industry and implicated key political figures, including PTI leader Jahangir Tareen and PML-Q MNA Moonis Elahi.

Unveiled at a press conference after a nod from the federal cabinet, the report details how over the years the sugar mill owners have manipulated the market to make windfall profits amounting to billions of rupees. The report also lists the nexus between these owners and various government officials that led to unregulated practices bypassing laws and often exploiting the farmers.

The commission’s report was presented to the media at a briefing by Information Minister Shibli Faraz and prime minister’s special assistants Barrister Shahzad Akbar and Shahbaz Gill. The commission was headed by FIA chief Wajid Zia who earlier in the day presented the report to the federal cabinet. The ministers said the prime minister would decide the course of action on the report after detailed recommendations are presented to him after Eid.

The commission’s report revealed how the ‘sugar cartel’ comprising 88 mills had cheated sugarcane growers and consumers at every step starting from the procurement of cane, production of sugar, sale in the local market and export, all of which led to price hike of sugar as well as billions of rupees of tax evasion.

“According to the report, sugar mill owners and their associates took benefit of Rs100 billion to Rs150bn every year,” Special Assistant to the Prime Minister (SAPM) on Accountability Shahzad Akbar told Dawn.

“If Re1 is increased in the price of sugar, it gives Rs5.2 billion to the sugar mill owners and, according to the report, Rs15 per kg production cost was increased by the mill owners and Rs15 per kg additional amount is being charged from consumers by market forces, which means that consumer is paying additional Rs30 per kg,” he said, adding that billions of rupees of benefit was availed by the mill owners in terms of subsidy, undeclared production and sale of sugar and tax evasion.

However, Mr Akbar skipped a question whether Prime Minister Khan will tender an apology to the nation for using money and aircraft of Jahangir Tareen during the election campaign in 2018.

The SAPM said the report exposed that sugar mill owners always quoted a higher cost of production which remained almost Rs15 per kg higher than the original cost. “For instance, in 2017-18 the cost claimed by sugar mill owners was Rs51 per kg while the commission assessed that it was Rs38 per kg so the difference was of Rs13 per kg. In 2018-19, mill owners quoted the cost as Rs50.6 per kg and the commission found it to be Rs40 per kg. Similarly, in 2019-19, the mill owners cost was Rs62 per kg but the commission claimed the actual cost was Rs46.4 per kg,” he added.

Presently, the market price of sugar at retail level is Rs85 per kg, whereas the SAPM said the mill owners had planned to increase it to Rs100 per kg, but due to the inquiry conducted by the government they were unable to do so.

The commission had been constituted by the government in the first week of April following the release of two separate inquiry reports of the FIA on the issue of artificial shortage of sugar and wheat in the country and sudden increase in their prices last year.

The report showed that in the past few years sugar production was historically more than the local requirement and said it was, therefore, imperative to include this aspect related to export of sugar, including any subsidy given, its impact on local sugar prices and eventually major beneficiaries of such export subsidies, if any.

The inquiry committee had found that sugar export was not justified as sugarcane production was expected to be low in harvesting season 2018-19 and with the export of sugar in January 2019, the prices of sugar sharply increased.

Shahzad Akbar said six groups of sugar mills were main beneficiaries of these manipulations. These include RYK owned by Moonis Elahi and Umar Shehriyar (brother of federal minister Khusro Bakhtiyar); JDW group owned by Jahangir Tareen, his son Ali Khan Tareen and Ahmed Ali; Sharif Group owned by Salman Shahbaz and Hamza Shahbaz; Hunza Group; Fatima Group; Al-Moiz Group and Omni Group.

The report said these groups had also been the major beneficiaries of Rs29bn federal export subsidy since 2015 as RYK received a subsidy of Rs3.94bn, JDW Rs3.05bn, Hunza Rs2.87bn, Fatima Group Rs2.3bn, Sharif Group Rs1.47bn, Al-Moiz Rs1.45bon and Omni Group Rs0.9bn.

Mr Akbar said these groups got Rs2.5bn export subsidy in 2015, Rs6.5bn in 2016, Rs15.5bn in 2019 from the Centre and Rs9.3bn by Sindh government and the major beneficiary was Omni Group. He said that in 2019 the Punjab government gave Rs3bn subsidy, but later Rs2.4bn was withdrawn.

The report also stated how sugarcane growers were cheated by mill owners by showing less weight of the sugarcane stocks, fixing less rate than announced by the government, etc. “In 2019, the support price of sugarcane was Rs190 per maund, but the mill owners purchased even less than Rs140 per maund,” the report stated.

“Another fact revealed during on-site investigation was that sugar mills were making deductions from cane growers for many years on various pretexts of non-variety, weight, etc, and paying them as low as Rs140 per maund or even less and cane commissioners failed to protect the rights of the farmers,” the report added.

The SAPM said there were several ways by which price of sugar was increased in the market and satta (speculation) was one of them. “In this way advance demand orders were issued suggesting that the price of sugar after three months will be higher,” he added.

One of the wrongdoings of the mill owners was that they always keep two separate record books — one for showing to the government departments concerned and the second for the owners’ original record.

During the sugar crisis, prices started registering an increase from December 2018. Ex-mills price jumped by Rs17/kg (33 per cent) from Rs 51.6/kg (December 2018) to Rs68.6/kg (August 2019), while retail price jumped by Rs19/kg (34pc) from Rs56/kg to Rs75/kg during the same period.

The report said six groups own 38 mills (out of the total 89) and control 51pc of the reported production (2018/19), viz, JDW Group (20pc), RYK (12pc), Al-Moiz (6.8pc), Tandianwala (4.9pc), Sharifs family (4.5pc) and Omni (1.65pc). Most of the mill owners are either themselves public office holders or have close relatives who occupy important government positions.

Shahzad Akbar said the commission found significant differences in the quantity of exported sugar mentioned by the mill owners and the figures registered by the Afghan government. He said the sugar mill owners received amount through telegraphic transfer (TT).

Transactions were made in over the counter US dollar cash deposits by exporters in local accounts (2013-15) and TTs from UAE/US, etc, in lieu of exports proceeds from Afghanistan (money laundering suspicion), the report said.

The following urgent policy-level actions/corrective measures are indicated in the report: Direct Banking Payments Systems for bona fide cane-growers, not commission-agents, readable bar-code tag on every sugar bag produced in the country for transparent documentation of sugar production and audit trail/monitoring of sales/supply chain through on-site & online-monitoring by the FBR.

Mandatory registration of brokers, sugar dealers, wholesalers were required with NTN & STRN with mandatory registration of godowns and automated online inventory management system. Restoration of annual mandatory 3rd cost-audit requirement, coupled with onsite and offsite was recommended. Examination/investigation of all sugar mills by the SECP over the next three years was suggested.

The Sugar Advisory Board was required to keep watch on every crushing season, after independent third-party cost analysis through finance/industries department of the federal government.

Information Minister Shibli Faraz gave the credit of making the report public to the prime minister and said such commissions had also been made in the past to probe wrongdoings of sugar cartel, but their reports had never been shared with the nation because former rulers themselves were involved in sugar business. “Sugar mafia has sucked the blood of the people,” he added.

Published in Dawn, May 22nd, 2020