Inquiry Committee Reports Export Of Sugar Was Unjustified

The inquiry committee constituted by Prime Minister Imran Khan to probe into increase in sugar price found out that the export of sugar was not justified and the exporters gained benefit in two ways by gaining subsidy and then fetching huge profit from the increasing sugar prices in the local market

ISLAMABAD, (UrduPoint / Pakistan Point News - 4th Apr, 2020 ) :The inquiry committee constituted by Prime Minister Imran Khan to probe into increase in sugar price found out that the export of sugar was not justified and the exporters gained benefit in two ways by gaining subsidy and then fetching huge profit from the increasing sugar prices in the local market.

The sugar price was increased from Rs 55 per kg in December 2018 to Rs 71.44 per kg in June 2019 despite the fact that General Sales Tax (GST) increase was implemented from July 01, 2019.

The report added that with the export of sugar in January 2019, the price of sugar started increasing immediately in the local market.

It said the major beneficiaries of the subsidy offered by the government on export of sugar include RYK Group, owned and controlled by Makhdum Omer Shehryar (relative of Makhdum Khusro Bakhtiar). They availed 15.83 percent of the total export subsidy amounting to Rs 3.944 billion. Chaudhry Munir and Monsi Elahi are also partners in this group.

JDW Group owned and controlled by Jahangir Khan Tareen availed 12.28 percent of the total export subsidy amounting to Rs 3.058 billion while Hunza sugar mills availed 11.56 percent of the total subsidy amounting to Rs 2.879 billion. Hunza sugar mills is owned by Muhammad Waheed chaudry, Idrees Chacudhry and Saeed Chaudhry.

Sugar mills owned by Sharif family availed 5.91 percent of the total export subsidy amounting to Rs 1.472 billion.

The report also revealed that in past few years the production of sugar was historically more than the local requirements, therefore it was imperative to probe and include this aspect related to export of sugar including any subsidy given, its impact on local sugar prices and eventually major beneficiaries of such export subsidies.

The production of sugar in 2016-17 and 2017-18 was more than the estimated domestic consumption of the country, hence the sugar was exported from Pakistan.

The estimated domestic consumption of Pakistan is around 5.2 million metric tons per year. In the year 2016-17, Pakistan had a record 7.08 MMT production of sugar while the production was 6.63 MMT in 2017-2018.

On request of the committee the Federal government has set up the commission to probe into the sugar crisis and to conduct forensic audit of the sugar mills.

The commission of inquiry has started its work and nine teams are already on the ground for the forensic analysis if the 10 sugar mills including Alliance sugar mills Ghotki, Al-Arabia sugar mills Sargodha, Al-Moiz 1 sugar Mills DI Khan, Al-Moiz 2 sugar Mills Mianwali, Hamza sugar mills RY Khan, Hunza 1 and Junza2 sugar Mills Faisalabad and Jhang, and JDW 1,2, and 3 sugar Mills RY Khan and Ghotki.

Due to the limited time available to the commission a reasonably large sample of above mentioned sugar mills, which produce about 26 percent of the total sugar production in Pakistan, and are located in the three provinces of the country, has been selected.

The Commission of inquiry has been given the time frame of 40 days for completion of its work.

The inquiry committee also highlighted consideration about possible increase in sugar price in coming month of Ramadan.

The Pakistan Sugar Mills Association (PSMA) calculation of ex-mills price of sugar, at the sugarcane purchase rate of Rs 190 er 40 kg, is Rs 83.59 per kg.

Keeping in view the margin of Rs 5-7 per kg between ex-mill price and the retail price would be around Rs 89-91 per kg.

With the addition of increased sugarcane average price of this season, which is Rs 218.85 per 40 kg, the ex-mill and retail price of sugar would further go up.

The report pointed out that Gambling (Satta) being played at major sugar markets is already crossing Rs 100 per kg for Ramadan.

The lifting of already sold sugar is very slow and therefore supply is not going to match the demand.

The commission recommended that the provincial departments may be made aware of the situation and immediate crackdown should be made on the Satta players who are known well to the provincial special branch and intelligence agencies.

It added that total sugar production till March 18, 2020 was 4.78 million metric tons with a carryover stock of approximately 0.52 million metric tons. The total sugar stock would be about 5.3 to 5.4 million metric tons, which is almost equivalent to the domestic annual consumption.

This narrow margin would provide opportunity for the hoarding and manipulation of sugar market. Keeping in view of this situation, the federal government may consider the import of sugar for strategic reserve to ensure the stability of prices in market.