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May 23, 2020

Sugar report

Editorial

 
May 23, 2020

Finally, the cat is out of the bag now, though it wasn’t much hidden earlier too. With the release of the Sugar Forensic Commission (SFC) report, the details have been made public regarding the sugar shortage and price hike in the country earlier this year. Much of the contents of the final report appear to confirm the earlier findings that sugar mill owners acted as cartels and six major groups held more than half of the production supply. These mill owners are mostly influential businessmen and politicians who have remained in power for long and their families in the past two to three decades have reaped the ill-gotten fruits of both power and pelf. For example, an audit of one such mill showed that in just four years from 2014 to 2018, there was a systematic cut of 10 to 15 percent for farmers, translating into Rs970 million in just four years. Such cuts are a huge blow to farmers, who find themselves at the mercy of sugar mill owners.

The same mill underreported the production cost and sold supplies to unnamed buyers. This is a gross violation of Pakistan Penal Code but the owners, belonging to power-wielding families, never faced the music. Another big name owned over 20 percent shares in a sugar mill. The report reveals that the mill employed double-booking, forward-sales, over-invoicing and underreporting, thus committing all four cardinal sins of financial malpractices in the industrial sector of Pakistan. This mill under-invoiced sales resulting in cost inflation of 25 percent. They also defrauded money by transferring huge amounts from their PLC to their private company. There is no denying the fact that in all this it was ultimately consumers and farmers who suffered the most. The farmers did not get their due share and the consumers had to pay much more than they should have been paying.

When the mill owners show the cost of production to be more than the support price, it means the farmers get much less than their due share. Rather than earning five to ten percent of reasonable profit, the mill owners managed to manipulate the entire system from production to distribution and extorted 35 to 40 percent in profits. The report further reveals that in 2019, the sugar mills determined the production cost to be over 50 rupees per kg whereas the forensic commission report estimated the cost to be less than 40 rupees per kg. There are other details that can be gleaned from the report, but at least one point must be stressed again – during the past two years of the PTI-led government there has not been any improvement in the malpractices, and many of the culprits are still part and parcel of the present dispensation. It is yet to be seen how the PM takes actions against the culprits and how NAB moves forward to nab those who have actually indulged in corruption of such enormous proportions.