ISLAMABAD: The Commission of Inquiry (COI) probing reasons of sudden increase in sugar price has traced hundreds of 'suspicious benami transactions' worth Rs362 billion which apparently pertained to undocumented or out of books sale of some 6.4 MMT of sugar by mills owners in past five years.
Nine (9) teams conducting forensic audit (on behalf of the COI) of six (6) sugar producing companies got hands on some exclusive data from servers of ten sugar mills which have allegedly been involved in purchasing out of the books cane from farmers through hundreds of middle men, manipulating supply to the market to maximise profiteering.
Entire record of major recipients of sugar subsidy and sugar sale was sifted through by around 72 senior officials operating on the ground for Commission of Inquiry, and the mills being probed included Alliance Sugar Mills, Ghotki, Al-Arabia Sugar Mills Sargodha, Al-Moiz 1 Sugar Mills DI Khan, Al-Moiz 2 Sugar Mills Mianwali, Hamza Sugar Mills RY Khan, Hunza I and Hunza 2 Sugar Mills Faisalabad and Jhang and JDW 1, 2 & 3 Sugar Mills RY Khan and Ghotki.
Background interviews with around a dozen officials associated with the commission revealed to Geo News that around 6.4 MMT sugar was deliberately not sold through process of documentation by the owners of the aforesaid sugar mills from 2015 to 2019.
Sugar sold out of books weighed around 6.4 MMT (1.12 MMT sugar worth Rs55 billion in 2015-16, 1.55 MMT sugar worth Rs58 billion in 2016-17, 1.45 MMT sugar worth Rs56 billion in 2017-18, 1.15 MMT sugar worth Rs65 billion in 2018-19 and 1.1 MMT sugar worth Rs75 billion in 2019-2020, revealed a senior official seeking anonymity, adding, investigators focused on six companies whose forensic audit is being conducted at the moment.
Millers collectively sold 6.4 MMT sugar out of books (undocumented) to some 700 brokers and middle men during past five years whereby they allegedly evaded sales taxes estimated at around Rs33 billion (Rs4.9 billion against 1.12 MMT sugar in 2015-16, Rs6.1 billion against 1.55 MMT sugar in 2016-17, Rs5.9 billion against 1.45 MMT sugar in 2017-18, Rs5 billion against 1.15 MMT sugar in 2018-19 and Rs11 billion against 1.1 MMT sugar in 2019-2020), added the official. This out of book sugar was sold to brokers/middlemen on cash payments worth Rs362 billion and all transactions were benami, i.e. unrecorded.
Probing teams got details of around three dozen suspicious accounts opened in the names of employees of different sugar mills where transactions of over Rs5 billion were made during past five years. These benami transactions, officials claim that thousands of more such suspicious transactions could come in coming days, apparently fetched sizeable cash tranches to the mills owners who entered into un-written agreements with potential buyers for more profit as well as to evade taxes.
Forensic teams also evaluated accounts of various power plants set up by various mills owners (JDW Group owned by JKT) (2 plants at their 2 mills with supply of 25MW to the NTDC), one power plant of RYK (Khusro Bakhtyar) with capacity of 15MW, power plants of Thal Industries, Layyah Sugar Mills with capacity of 20MW, power plants of Al Moiz Industries (15MW), Chenar Sugar with capacity of producing 20MW and a few other sugar mills, officials said.
Informed officials told this correspondent that the millers collectively showed production of 29.2 MMT sugar (5.123 MMT in 2015-16, 7.080 MMT in 2016-17, 6.631 MMT in 2017-18, 5.268 MMT in 2018-19 and 5.00 MMT in 2019-2020) in their record. By purchasing cane with tag price of Rs180 (2015-16,2016-17,2017-18 & 2018-19) and Rs190 (2019-20) per 40-kg, the millers showed documented 29.2 MTT sugar worth Rs4,322 billion from year 2015-16 to 2019-20.
On this business, millers collectively paid indirect taxes worth Rs86 billion from 2015-16 to 2018-19. They paid Rs15.47 billion in 2015-16, Rs23.44 billion in 2016-17, Rs20.19 billion in 2017-18 and Rs26.6 billion in 2018-19 on account of indirect taxes while tax authorities have yet to determine amount for taxes paid by millers for fiscal year 2019-2020 season is yet to be determined.
On this ongoing forensic audit, owner of JWD group Jahangir Khan Tareen says, "I have no objection whatsoever to the forensic audit of my mills, as I've nothing to hide." But he questioned what criteria [inquiry commission] was used to select 9 mills for the forensic audit. Does the commission believe that by doing a forensic audit of nine sugar mills only, they can get a complete picture of the total sugar industry of Pakistan, which has 80 sugar mills, asked Mr Tareen?
Federal and provincial governments paid total subsidy of Rs24.94 billion under different subsidy schemes from 2015 to 2018. 3.20 MMT sugar was exported in 2017, 2018 and 2019. 0.92 MMT in 2017, 1.53 in 2018 and 0.744 MMT sugar in 2019.
The JDW group has 2 plants at their 2 mills, supply 25MW to NTDC. RYK (Khusro Bakhtyar) has one plant and supplies 15MW. Thal Industries, Layyah Sugar has one plant, supplies 20MW. Al Moiz Industries Unit No 2 has one plant and supplies 15MW. Chenar Sugar has one plant and supplies 20MW. Major beneficiaries of the total subsidy of Rs24.911 billion are RYK Group of Khusro Bakhtyar and his brother Omer Sheryar who availed Rs3.944 billion (15.83 percent) wherein Chaudhry Monis Elahi and Chaudhry Munir are also partners in that group.
The JWD Group, owning 6 sugar mills, controlled by Jahangir Khan Tareen took Rs3.05 billion as sugar subsidy where Makhdoom Ahmed Mahmood is also partner in that group. Hunza Sugar Mills availed itself of Rs2.87 billion under sugar subsidy while group is owned by Waheed Chaudhry, Idrees Chaudhry and Saeed Chaudhry. Fatima Sugar Mills owned by Faisal Mukhtar family got Rs2.3 billion under subsidy while Sharif family availed itself of Rs1.47 billion in subsidy. Al-Moiz Group owned by Shamim Khan (A first cousin of JKT) got Rs1.45 billion while Omni Group owned by Anwar Majeed family got Rs901 million subsidy.
The commission also observed that the millers earned Rs196 billion by exporting sugar to different countries from 2016 to 2018. The COI also observed that in Dec 2015, sugar prices were Rs55 per kg while in Feb 2016, the retail price of sugar surged to Rs62 per kg. In Aug 2017, prices remained between Rs57 to Rs60 per kg, in April 2018, sugar prices were between Rs49 to Rs51 per kg. Then from Dec 2018 onwards sugar price jumped up from Rs52 per kg to Rs75 kg and ultimately in Dec 2019 the price touched Rs80 per kg.
Exercising its power, under section 3 of the Act to constitute inquiry commission (under Act 2017), the commission is probing as to who were the real beneficiaries of sugar crisis through manipulation of prices and through cartelisation. COI is also investigating impact of tax increase on sugar prices at ex-mill /retail level and hoarding of stocks at whole sale/retail level and within sugar mills vis-a-vis left over stocks of the previous years.
Whether export of sugar by payment of massive subsidies was justified considering local demand and the price hike in the domestic market. The commission is also determining role of various stakeholders, including government institutions and private sector that led to increase in sugar prices. The commission, so far, has interviewed more than two dozen key individuals dealing with the sugar crisis.