PRIME MINISTER Imran Khan has sanctioned the launch of multiple investigations against sugar mill owners on the basis of the findings of a comprehensive forensic audit report prepared by the high-powered Sugar Inquiry Commission last month. This is an unprecedented move against an entire industrial sector, which has operated as a cartel and tricked all stakeholders — government, farmers, taxpayers and consumers — for years without any accountability and deprived them of tens of billions of rupees. The sugar cartel has allegedly cheated farmers, evaded taxes, secured undue subsidies and committed corporate fraud with impunity because of its deep political influence over all political parties and successive civil and military administrations. The sugar inquiry has done a good job by pointing out systemic issues in the industry. The report reveals how the cartel duped the stakeholders every step of the way, from the procurement of sugarcane from farmers to the sale of sugar — domestic and export — and how it supplied incorrect and unverified data, besides using its political clout to secure undue subsidies from decision-makers and regulators. It has also underscored the collusion of industry regulators and owners for financial benefit.

The investigations will be conducted by anti-corruption agencies such as NAB, FIA and provincial anti-corruption bodies, as well as financial and corporate sector regulators ie the State Bank, FBR, CCP and the SECP. All will be looking into different aspects of the alleged fraud by sugar mill owners and will finalise their reports in 90 days. For example, the State Bank has been tasked with probing the possibility of sugar exporters having forged documents to secure freight subsidy without actually shipping the commodity to Afghanistan, and bank defaults. NAB will probe the issue of sugar export and other subsidies, and the CCP will be looking into cartelisation that manipulates the market. Asset Recovery Unit head Shahzad Akbar and Information Minister Shibli Faraz promised to “take on all the mafias in the country one by one. Everyone will be held accountable, no matter how rich or politically powerful”. That commitment will be tested in the weeks to come. In the meanwhile, the government needs to satisfy its critics, who are accusing it of allowing Jahangir Khan Tareen, the largest sugar producer and until recently a close adviser to Mr Khan, to fly out of the country hours before the announcement of the probe against sugar mill owners. Mr Tareen, who bankrolled the PTI’s election campaign in 2018, has claimed he was going abroad for his biannual medical examination and not running away.

While industry practices need further investigation, especially to bring to book those who have stolen billions over the years, it is equally important to reform the sugar supply chain. That can be done by gradually deregulating the industry, doing away with the support price mechanism, withdrawing curbs on the free import/ export of sugar and improving corporate oversight.

Published in Dawn, June 9th, 2020