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Friday May 24, 2024

The sugar scam

By Mohammad Zubair
April 13, 2020

The recent release of the FIA report on the sugar and wheat crises has once again exposed the lack of competence and capacity of the present government.

The report is so damaging that no one from the federal or Punjab governments has shown any confidence and come forward to defend the decisions taken over the last 18 months or so. The fact that the report has been released is the only point of defence offered by PTI stalwarts.

It all started in September 2018 – barely a few weeks after the PTI came into power. As if sugar export was the most important item for the new government, the sugar advisory board met within two weeks of the new government’s induction with the recommendation to export one million tons of sugar. This board was headed by none other than Mr Razzak Dawood (later in December, another hundred thousand tons of sugar was approved for export).

A summary was prepared by the ministry and submitted in the Economic Coordination Committee (ECC). Based on the summary, the ECC approved the export. Apparently, no debate took place nor any questions raised in that meeting, as is now being revealed. What we know is that the secretary of National Food objected to the export based on concern of possible shortages due to anticipated low production of sugar. That concern was justified when the actual numbers later reflected a decline of 1.4 million tons between 2017-18 (the PML-N’s last year) and 2018-19.

Why did the ECC approve the summary for export of one million tons of sugar within weeks of coming into power and without taking into consideration the season’s production? This is the most important question that needs to be answered. A summary of this magnitude and so early in tenure should have raised alarm bells.

Even more important is the way the federal cabinet approved it. Did the cabinet members even read the summary and if they did, why did no one object or raise fundamental questions with regard to quantity, season production, possible shortages and possible price increases ? It seems no one paid any attention at both the important forums – the ECC and the cabinet.

The decision to export one million tons was the starting point of the entire scam but alarmingly much more was to come both in terms of incompetence and possible corruption due to conflict of interest. Senior party stalwarts with stakes of approximately 40 percent in the industry were direct beneficiaries of the decision to export and subsequent subsidy. The federal cabinet decided that no subsidy will be given to any exporter. This was logical since exporters were to benefit from the massive devaluation that had already taken place. Rightly, the federal cabinet did not approve any subsidy.

Those with beneficial interest found an easy alternate to get the approval for export subsidies. Having failed at the federal cabinet level, the Punjab government was approached. The Punjab food minister refused to support the subsidy. Even then the Punjab cabinet headed by CM Usman Buzdar approved the subsidy amounting to Rs3 billion. This was a clear violation of the decisions of the federal government.

We don’t know as yet whether CM Buzdar took the prime minister’s approval beforehand. It is hard to believe that he could take such a major decision on his own without taking the PM’s consent. What we do know however is that the PM came to know of the Punjab government’s decision around that time. This has been confirmed by Shaikh Rashid in a recent TV interview; according to Sh Rashid, he personally conveyed his concern to the PM. What we also know is that the PM did nothing.

The mess or mismanagement did not end here. In June 2019, Asad Umar, who was no longer the finance minister, raised serious concern in parliament with regard to the crises in the sugar industry and demanded the prime minister order an investigation; the PM was still indifferent to what was brewing as a major crisis.

Meanwhile, other favours were being dished out to the sugar industry including reduction of turnover tax as well as withholding tax. With about 40 percent of the sugar industry in the control of groups close to the government, there was natural concern for conflict of interest.

While the sugar exports continued, the country started facing serious shortages which led to unprecedented price increases. Even when the prices reached as high as Rs80, there was no reaction from the government. During the months of December 2019 and January 2020, the exports continued despite widespread shortages in the country. It looked as if the federal government was oblivious of what was happening in the country.

The media and opposition were raising the issue at all forums. Finally on January 30, the government woke up. The sugar advisory board met and advised an immediate ban on exports. Based on this recommendation, the ECC formally stopped exports on Feb 10, 2020.

Unfortunately, by that time the damage had been done. The prices went up from around Rs55 to more than Rs80 in no time.

Looking back, it is clear that there was no reason to allow export of such a huge quantity. While billions went out from the pockets of Pakistani people, only a few individuals close to the government pocketed those additional billions.

This whole episode clearly reflects poor decision-making at all levels of the federal and Punjab governments. This is a huge policy failure and the PM is to be held responsible. All key people have been appointed by the PM, including the key position of Punjab chief minister.

The fact that vested interests have been protected by forums such as the ECC, and the federal and provincial governments is again a reflection of the competence that abounds. This is on the PM.

The writer is former governor Sindh and former minister for privatisation.