Monday November 29, 2021

Hasty Buzdar sanctioned sugar subsidy

April 10, 2020

ISLAMABAD: Punjab Chief Minister Usman Buzdar was in such a hurry to get sugar subsidy of Rs3 billion approved that he first got the cabinet approval, without even letting the ministers to read the proposal, and later gave ex-post facto approval to the legal formalities short-circuited.

Official documents available with The News reveal that three days after the cabinet’s approval of the Rs3 billion subsidy, the Punjab chief minister on Jan 1, 2019 approved “ex-post factoplacement of case for consideration of the provincial cabinet”.

It was such a hasty affair for the Punjab chief minister that two days after the ECC met in Islamabad and without even waiting for the ECC minutes, he following a verbal communication from Islamabad chaired a meeting and decided to give Rs3 billion subsidy to influential sugar industry.

Later, without waiting for the consultation process between provincial departments and ignoring even the all important finance department’s view, Buzdar took up the subsidy issue in the cabinet meeting on December 20, 2018 as a surprise an ex-agenda item.

By doing this, the bureaucratic consultation processes as envisaged in the rules of business were crushed. To make the correction of the processes already trampled, the Punjab chief minister had to give ex-post facto approval of his past actions.

Interestingly, the Punjab Finance Department, whose summary was ignored while taking the decision of sugar subsidy, had shown its reservation to the ECC decision, which is generally deemed to be against the subsidy but found out favourable to the sugar industry. The ECC, which decided the matter, was chaired by Asad Umar.

What is being written here is backed by the official documents, which show the Punjab Food Secretary on December 22, 2018 moved a summary on “Subsidy on export of sugar”.

The summary started with these facts, “Provision of subsidy on export of sugar was discussed in a meeting held under the chairmanship of the Punjab chief minister on Dec 6, 2018 at 10:00am in the Committee Room 8-Club Road in the light of verbal information on decisions of ECC dated 04.12.2018.”

It added, “It was resolved that rate of freight support/export subsidy on export of sugar may be maintained at the level of share of subsidy (Rs5.35/kg) shouldered by government of the Punjab during the year 2017-18. It was also resolved that total volume of export freight/subsidy shall not exceed Rs3.0 billion.”

Then the Food secretary’s summary added that later the ECC minutes were received. The relevant decision of the ECC was reproduced in the summary, which interestingly against the general perception that Asad Umar led ECC said “no” to sugar subsidy, was actually an encouragement for the provinces to give subsidy.

The ECC decision quoted in the Food secretary’s summary reads as: “The ECC underscored the importance of providing relief to the farmers by ensuring start of crushing by sugar mills at the earliest. It was also decided that since the entire issue of freight support arose due to varying procurement prices of sugarcane fixed by the provincial governments, therefore, the freight support may be determined/paid by the respective provincial government, if deemed appropriate.”

The summary added, “Decision of the ECC with regard to the provision of export rebate/freight subsidy was placed before the cabinet committee on sugar sector in its meeting held on 17.12.2018.

The cabinet committee (chaired by Usman Buzdar) deliberated upon the proposal of the department restricting the export limit for Punjab to 52 percent of total exports and total subsidy outlay’s limit to Rs3 billion. After thorough discussion, the committee resolved that export limit from Punjab may be restricted to 0.572 MMT. The committee also approved provision of subsidy on a sliding scale ……”

In para 4 of the summary, the Food secretary sought approval of export of sugar up to maximum 52 percent (0.572 MMT) with export subsidy @ Rs5.35/kg and subject to the condition that subsidy shall not exceed Rs3.0 billion.

On Dec 23, the Food minister endorsed the summary and forwarded it to the Finance Department.

On Dec 27, Special Secretary Finance wrote a note on the summary. The note said that the matter of export of sugar is as much as the liability of the federal government as it is for the federating units. However, Punjab was not taken on board regarding the decision taken by the ECC (chaired by Asad Umar) and the federal government unilaterally decided to pass this burden on the provinces.

The special secretary finance note added that no separate budgetary allocation for subsidy on sugar export was made in the budget of current financial year. In case para 4 of Food secretary’s summary is approved, it would entail release of requisite funds as supplementary grant in current fiscal year, which would in turn require approval of the Standing Committee of Cabinet on Finance and Development. In future, the administrative department should get the required funds allocated through budgetary provisions as export of sugar is a regular annual practice so that provision of funds through supplementary grants is avoided.

The special secretary finance on Dec 27 forwarded the Food Department’s summary along with his note to the Chief Secretary.

The same day (on Dec 27), the Chief Secretary returned the summary to the Finance Department with the note: “Finance Department may give specific views with regard to the proposal at para 4.”

Next day, on Dec 28, the Special Finance secretary again referred the summary back to the Chief Secretary with a note: “10. The summary has been examined. Subsidies are never a preferred option and are instead considered distortion for sound economic management especially when the impact or concrete translation of such initiatives to the welfare of the intended beneficiaries is not clear. Therefore, such economic distortions need to be discouraged in principle. Food Department should have provided analysis of actual impact of subsidies given in the past years for fair assessment. Further, for future, Food Department should present policy options focusing welfare of farmers and agriculture sector of the province.”

In his note, the Special Secretary added that the above advice of the Finance Department has been tendered on guidance of the finance secretary, who is on way to Bahawalpur to attend provincial cabinet meeting.

The same day, the Chief Secretary received the summary and noted, “FS (Finance Secretary) may record his views before putting up matter to CM (Chief Minister).”

While this summary was being processed, the Punjab chief minister on the very next day on Dec 29 allowed the food minister (in the Bahawalpur cabinet meeting) to take up the subsidy issue before the cabinet despite the fact that it was neither on the cabinet agenda nor any of the ministers were given summary.

As reported by The News on Thursday, the Punjab chief minister and the food minister got the decision bulldozed in the cabinet meeting of Dec 29.

Two days later, on December 31, the Finance Secretary noted on the original summary of the Food Department: “The issue (subsidy on sugar) was taken up by the provincial cabinet as ex-agenda item in its meeting held on Dec 29, 2018 at Bahawalpur and decided. Punjab chief minister may like to approve ex-post facto placement of case for consideration of the provincial cabinet.”

The same day, on Dec 31, 2018, the Chief Secretary signed the summary and forwarded it to the Chief Minister Office.

On Jan 1, the Punjab chief minister’s principal secretary noted on the file, “Chief Minister has seen and is pleased to approve the proposal contained at para 16 read with para 17/ante.”

This note of the Chief Minister’s principal secretary got the file closed containing material that can decide the fate of Usman Buzdar, an official source commented.

The source said that it is a case where Chief Minister and food minister “ambushed the whole cabinet “ by bringing a decision of monumental implications, costing the provincial exchequer Rs3 billion - and took a decision through perfunctory discussion without sharing any document or data in written form with cabinet members.