FBR to install VAS at all sugar mills costing Rs350m

ISLAMABAD: With a view to containing the sugar barons’ influence in creating the artificial deficit of sugar, causing hike in the price, the government has decided to install in premises of all sugar mills in the country Video Analytics Surveillance System (VAS) on its own expenses to monitor production volume and to bar them from tax evasion which runs into Rs12-15 billion per annum.

Earlier the decision was taken under which the every sugar mill will bear expenses for installing VAS system, but it is found that the system that was installed by them was sub-standard and was not yielding the required results.

Now under the latest scenario, Federal Cabinet has now accorded approval to an urgent allocation of Rs350 million as demanded by FBR and exemption from the application of Public Procurement Rules and Regulations for installation of the most optimal Video Analytics Surveillance System (VAS) in the premises of every sugar mill across the country.

“The decision has been taken to ward off the role of the sugar manufacturing industry in creating shortage of sugar as the industry under-declare their production volumes, engage in out-of-book sales, suppress production quantities and create artificial shortages by building up undue inventory in order to increase market price,” unfolds the official documents. “These unscrupulous activities of Industry not only negatively impact sugar price for consumers but also the revenues of the Federal Board of Revenue (FBR). This revenue loss for FBR is estimated to be in the range of Rs12-15 billion per annum.” With installation of VAS, sugar mills will not be able to hoodwink the government on production of sugar and on tax evasion too.

FBR aims to acquire and implement information technology-based tools and solutions in order to ensure fair and just federal tax revenue collection, improved monitoring of production and reliable tax revenue forecasting.

In the summary, which has been approved by the Federal Cabinet, FBR argued, saying that across the globe, VAS analytics technologies (VAS solutions) are used to assist in the process of monitoring and recording on production lines. Such solutions identify product items, extract information from the image of the product item and count product items. It is useful not only for enhanced tax collection but offer the most feasible, reliable and trustworthy approaches to report actual production volumes. With minimum human intervention a VAS, if implemented in a proper and transparent manner, can safeguard the interests of tax revenue collection by providing virtual access to production lines and processing visibility through automated data capturing has on real-time information. It can also act as a deterrent to tax fraud through obscuring visibility of production and product attributes and as disincentive to fraudulent activities such as under-declaration. The VAS implementation will also ensure a level playing field to all role players in the sugar industry sector.

In the summary, it has also been mentioned that the VAS System, however, has so far been installed only by eight sugar mills and those too are sub-standard solutions. Ostensibly, the cost, which under the prevailing rules is to be borne by the sugar mills, has been the key factor towards unsuccessful implementation of the VAS System.

Sugar mill-owners, in an apparent effort to cut cost, went around getting demonstrations and quotations from all seven vendors consuming unending time in the process; those that went ahead with installation eventually opted for the cheapest and sub-optimal solutions. A relatively small contract size/volume (80 mills only) to be distributed over seven vendors, also did not prove enough an incentive for them to aggressively invest in procurement of the systems and install in a timely fashion.

The last deadline of January 31, 2021 has already expired and it seems unlikely that the VAS System would be installed in a satisfactory manner across the board by all the mills soon enough.

FBR had pleased, saying that the situation warrants change in approach as it is believed that picking up of VAS System expenses by the government and awarding the contract to only one vendor to complete installation at the mills' premises, and establishment of a Central Control Room at FBR in the shortest possible time as desired vide the prime minister's directives dated January 22, 2021 could achieve the desired results.

And that’s why FBR had pleaded for an urgent allocation of Rs350 million as Technical Supplementary Grant and exemption from the application of Public Procurement Rules and Regulations for installation of the most optimal VAS solution selected in the least possible time.