Rs44bn fine imposed on sugar industry

Published August 14, 2021
The penalty has been imposed on the calculation of turnover of 55 sugar mills for the financial year 2019. — Dawn/File
The penalty has been imposed on the calculation of turnover of 55 sugar mills for the financial year 2019. — Dawn/File

ISLAMABAD: The Competition Commission of Pakistan (CCP) on Friday imposed the highest-ever penalty of Rs44 billion on the sugar industry for cartelisation, price fixing and market manipulation.

The penalty has been imposed on the calculation of turnover of 55 sugar mills for the financial year 2019, with a maximum penalty of Rs300 million having been imposed on the Pakistan Sugar Mills Association (PSMA). A penalty of Rs75m was imposed for each of four violations committed by the association, summing up to Rs300m.

The CCP has directed the PSMA and sugar mills to stop the violations highlighted in the order and deposit the penalty within 60 days.

Meanwhile, a PSMA press release said the CCP decision was not a final order as two members did not adhere to the point of view of the chairperson and voted in favour of the sugar mills and the PSMA.

“The chairperson of the CCP does not have the powers to cast a second vote in the proceedings as per the Competition Act,” the press release added.

PSMA, mills found to have effectively distorted competition in market

Meanwhile the CCP order states that the sugar mills were found to be collectively deciding the quantum of exports, eventually controlling the domestic supply of sugar in the relevant market during the period 2012 to 2020.

The CCP has said that the government lacks the means of cross-checking this information due to capacity constraints.

The order states that it has been observed that there was an absence of independent, timely, and accurate information-gathering framework to provide quantitative support in the government’s price controls mechanisms for essential commodities.

“As a result, the policy making is based on questionable sources of information,” the CCP said. “Instead, policy decisions that affect the lives of all citizens are taken largely relying on the questionable input received directly from the relevant industry associations or groups of suppliers, wholesalers, or retailers who have a vested interest,” the order added.

A fixed penalty of Rs50 million has been imposed on each of 22 sugar mills for collusively participating in the tender issued by the Utility Stores Corporation (USC) in 2010. The divided order has been passed by the full four member CCP bench including its chairperson Rahat Kaunain Hassan and members Mujtaba Ahmad Lodhi, Shaista Bano and Bushra Naz Malik.

However, Ms Bano and Ms Malik recorded a dissent note over the order and after the deadlock situation Ms Kaunain decided to approve the order. This is also the first time the commission has passed a split decision.

Earlier, the CCP had approved a provisional order against the sugar sector in 2010, but the proceedings were stopped as the matter was still lying in the Sindh High Court.

Published in Dawn, August 14th, 2021

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