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June 1, 2020

Govt readying action plan to fix sugar mafia

Top Story

June 1, 2020

ISLAMABAD: The Imran Khan government will launch NAB, FIA, FBR, SECP, Anti-Corruption department and Competition Commission of Pakistan to initiate proceedings – under criminal, tax, regulatory and anti-corruption laws – against the sugar mafia identified in the recent Sugar Commission report, it is learnt.

This action will not be restricted to those sugar mills and persons whose roles have been covered in the report, but the institutions concerned will be asked to do the forensic audit of all other sugar mills to fix what the sources call “sugar mafia” once and for all.

The government action will entail arrests, registration of FIRs and criminal cases, tax proceedings and regulatory actions. Sources in the government confided to The News that the issue of subsidy would likely be referred to NAB or FIA to probe all those, including even the Chief Minister Punjab Usman Buzdar, who have been allowing subsidy during the last five years.

These sources said on the direction of Prime Minister Imran Khan, his Special Assistant on Accountability and Interior Shahzad Akbar is presently firming up proposals for initiating action against the sugar mafia on the basis of what the Sugar Commission has recommended.

It is said that the action plan against the sugar mafia is expected to be finalized and announced by the end of this week. Those involved in preparing the action plan are relying on the recommendations of the Sugar Commission.

“We are bound to implement these recommendations,” a source said, adding that all relevant institutions will be referred the cases as per their domain to ensure that every criminality, illegality, tax and regulatory violation is properly addressed and those found responsible are made accountable.

It is said that almost all those nine sugar mills whose forensic audit has been done are found involved in wrongdoings. The departments concerned, it is said, will now be directed to do the forensic audit of other sugar mills to identify their roles.

Asked if the government will probe the Punjab Chief Minister Usman Buzdar on the issue of subsidy or will focus on the past rulers only, these sources said the findings of Sugar Commission on subsidy will be referred either to NAB or FIA for probe and action against all those involved.

These sources said there would not be any exception. The Sugar Commission report reflects badly on the role of Punjab chief minister for allowing Rs3 billion subsidy to the sugar mills. “We can’t ask for selective action when the Sugar Commission report also finds the subsidy given during the PTI tenure as ‘unjustified,” a source said.

The report found serious wrongs in the sugar mills owned by Jahangir Tareen, Moonis Elahi, Omar Shehryar, Omni Group and Sharif Group. The forensic report uncovers the gross misconduct by the sugar industry in the form of under-reported sugar sales, sale of commodity to benamidar (unnamed) buyers, double booking, over-invoicing, under-invoiced sale of bagasse and molasses which resulted in cost inflation and many other corporate frauds have been detected in the transactions of sugar mills.

The commission, constituted by the Interior Ministry to carry out forensic audit of sugar mills, has audited the record of six sugar mills including Prime Minister Imran Khan’s close aide Jahangir Khan Tareen’s owned JDW sugar mills, PML-Q’s leader Moonis Elahi’s owned Alliance sugar mills and Salman Shahbaz owned Al Arabiya sugar mills.

The report has highlighted that all of them have been found involved in committing corporate frauds to the tune of billions of rupees. The entire sugar industry declared total sales of approximately Rs124 billion; out of this Rs43 billion was sold to the registered persons. If the sales made to Income Tax registered persons worth Rs14 billion is taken out, then the rest of Rs58 billion sale has been made to unregistered persons who are suspected benamidars.

Similarly, the report highlights that the less production has contributed very little in the price hike of sugar. Other factors like market manipulation, hoarding, and practice of “Satta" were also responsible for price hike.

The difference between sugarcane produced and crushed is significant. Significant quantity of this gap can be attributed to the off-the-book purchase of sugarcane and resultant off-the-book production of sugar. This factor is amply supported by the evidence gathered during the forensic audit of most of the sugar mills under audit.

About the market manipulation, the report says there is ample evidence of market manipulation for profiteering by certain sugar mills through forward contracting, non-lifting of sold sugar and facilitation to the selected brokers who indulge in "Satta”. Although there are clear indicators that cartelization exists, the main regulators i.e. CCP has remained a silent spectator since its report on cartelization in 2009.

The issues prevailing in the sugar industry have been contended since 2009 and are not unfamiliar matters. According to the report, there is sufficient evidence of hoarding of sugar at the level of sugar mills in connivance with brokers/investors.

The sugar mills facilitate keeping the sold stocks hoarded in their godowns, which leads to undue profiteering. Despite the availability of relevant laws (Registration of Godowns Acts in Punjab and Sindh), no data of stocking of the sugar, by the stockists or the sugar mills, is being maintained by the provinces.