ISLAMABAD: Around two months after the release of a forensic audit report on the sugar scam, the federal government on Monday directed relevant authorities to launch a massive crackdown against sugar barons and submit their reports in next 90 days.

Adviser to the Prime Minister on Accountability and Interior Mirza Shahzad Akbar after seeking consent of PM Khan wrote separate letters to the State Bank of Pakistan (SBP), Competition Commission of Pakistan (CCP), chief secretaries of Punjab, Khyber Pakhtunkhwa and Sindh, asking them to launch a crackdown against the sugar mafia in the light of the forensic audit report. The sugar inquiry commission report was also annexed with the letters.

The Federal Board of Revenue (FBR) was directed to conduct an audit of all sugar mills across the country to investigate matters related to benami accounts, dubious transactions and tax evasion.

A letter had been sent to the National Accountability Bureau (NAB) for fixing responsibility on sugar barons according to the sugar commission report. The watchdog was also tasked to analyse the aspects of subsidies given to the sugar mill owners against the law.

On June 23, the federal cabinet accorded consent to an action plan on the basis of the sugar inquiry commission report.

Letters written to SBP, CCP and chief secretaries of Punjab, KP and Sindh, asking them to launch massive action

According to a press release, the federal government also sought clarification from the CCP over delay in action against the sugar cartels. The CCP will investigate matters like sugar hoarding and non-supply of sugar to the utility stores.

The SBP governor was asked to investigate sugar mills’ loans and dubious exports and submit a comprehensive report. The Federal Investigation Agency (FIA) and Securities and Exchange Commission of Pakistan (SECP) were tasked to probe corporate fraud and the export issue of sugar mills.

The departments concerned would also investigate the loans given on interest and short payments to sugarcane growers despite receiving hefty subsidies from the government. The provincial anti-corruption departments were also authorised to conduct investigations against sugar mills, according to the letters.

The forensic audit report of sugar inquiry commission was made public on May 21, two months after the FIA had submitted a report of investigations into the last year sugar scam.

The forensic audit exposed over Rs150 billion fraud in manufacturing sale and export of the commodity every year by sugar barons including ruling Pakistan Tehreek-i-Insaf (PTI) stalwart Jahangir Tareen, a brother of sitting federal minister Khusro Bakhtiar, a leader of PTI’s ally Pakistan Muslim League-Q (PML-Q), Monis Elahi, and sons of Pakistan Muslim League-Nawaz (PML-N) president Shahbaz Sharif.

The report also suggested criminal proceedings against those involved in the scam and referring their cases to relevant agencies including the FIA, NAB, FBR and provincial anti-corruption departments.

Soon after the report was presented before the federal cabinet by FIA Director General Wajid Zia, who was the head of the inquiry commission, Prime Minister Imran Khan had announced that no one in the government should have business stakes and directed that details of all assets of his advisers and special assistants be made public.

The report revealed that how “sugar cartel” in the country comprising 88 mills, in collaboration with some government departments CCP, FBR, Sugar Advisory Board and others cheated sugarcane growers and later common man right from the start of procurement of cane, manufacturing of sugar, sale in the local market, export subsidy and billions of rupees tax evasion.

“If Rs1 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 shown by the mill owners and Rs15 per kg additional amount is being charged from the consumers, which means that consumer is paying additional Rs30 per kg,” Mr Akbar said, adding that billions of rupees benefit was being availed by the mill owners in terms of subsidy, undeclared production and sale of sugar and tax evasion.

The report exposed that sugar mill owners always quoted higher cost of production (COP), which remained almost Rs15 per kg higher than the original COP. “For instant in 2017-18 the COP claimed by sugar mill owners was Rs51 per kg while the commission assessed that it was Rs38 per kg so that difference was of Rs13 per kg. In 2018-19 mill owners claimed the COP was Rs50.6 per kg and the commission found it was Rs40 per kg. Similarly, in 2019-20 the mill owner’s COP was Rs62 per kg but the commission claimed it was Rs46.4 per kg,” Mr Akbar said.

While the current retail rate of sugar is Rs85 per kg, the PM’s aide claimed that the sugar mill owners had planned to raise it to Rs100 per kg and they failed to do so due to the investigations into the sugar scam.

The sugar 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.

According to the report, sugar production had been more than local requirement over the past few years and it was 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.

PM’s adviser Akbar had said some six groups of sugar mills were main beneficiary in the scam. They are RYK owned by Monis Elahi and Umar Shehryar; JDW group owned by Jehangir 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 the groups were also major beneficiaries of Rs29 billion federal export subsidy since 2015, as RYK received subsidy of Rs3.94bn, JDW Rs3.05bn, Hunza Rs2.87bn, Fatima Group Rs2.3bn, Sharif Group Rs1.47bn, Al-Moiz Rs1.45bn and Omni Group Rs0.9bn.

The report hinted how cane growers were cheated by the mills owners by showing less weight of sugarcane, fixing less rate than that announced by the government etc. “In 2019 the support price of sugarcane was Rs190 per 40kg but the mill owners purchased [it at a rate] even less than Rs140 per 40kg,” it said.

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

The mill owners allegedly kept two separate record books, one for showing to relevant government departments and the other for themselves.

Published in Dawn, July 28th, 2020