CCP analyzing data of sugar sector

After imposition of maximum penalty of Rs 75 million on Pakistan Flour Mills Association (PFMA), the Competition Commission of Pakistan (CCP) is analyzing data of sugar sector to ascertain whether sugar mills are involved in collusive practices or cartelization.

Sugar price has increased in the retail market by Rs 10 per/kg to Rs 80 per/kg.

In December 2019, the CCP imposed a penalty on PFMA for fixation of price of wheat flour by providing a platform to share commercially sensitive information among members and fixing the quantities of production of wheat flour. The PFMA filed an application with the Competition Appellate Tribunal against the order of the CCP.

Prime Minister Imran Khan has also directed the CCP to take action against sectors involved in cartelization and collusive practices. Sources in the CCP told Business Recorder that the CCP has started an exercise to check data pertaining to cost of sugar production to ascertain how much profit is being made by the sugar industry. The purpose of the exercise is to also determine whether collusive practices are taking place in sale purchase of sugar.

The CCP is also keeping a close watch on the activities of sugar mills and Pakistan Sugar Mills Association (PSMA) and if any anti-competitive activity is observed, the commission is empowered to take action under its mandate. The CCP is searching for hardcore proof of cartelization within the sugar sector. The CCP has also put in place a system of "informant reward" and "leniency" to help reach the root of cartels.

When asked about action, if any, against profiteers/hoarders involved in increase in price of tomatoes from Rs 40 to Rs 400 per kg during October-November 2019, sources stated that provincial law needs to be upgraded. After the 18th Constitutional Amendment, the powers to regulate and monitor prices rest with the provincial governments; and hence recommendations were made to the provincial governments through a 'policy note' by the CCP. At the provincial level there are different laws with regard to essential commodities, food stuffs, agriculture produce markets and godowns registration and different departments are dealing with them.

The CCP sources revealed that it had recommended that all provincial laws need to be upgraded and consolidated under one law, keeping in view the current conditions, with a clear responsibility for implementation under a single authority.

The CCP has taken action against the sugar cartel in the past. In October 2009, the CCP conducted an enquiry and raided the offices of Pakistan Sugar Mills Association, where it impounded evidence of cartelization.

After enquiry, the CCP bench concluded that PSMA was involved in collusive practices, and it suggested maximum penalty on the association for violating the competition law. However, the operation of the order was restrained by the Sindh High Court where PSMA had challenged the CCP's enquiry.

In 2012, the CCP issued a policy note that the Punjab government should lift ban on the establishment and enhancement/expansion of existing sugar mills in Punjab. A CCP's opinion in 2018 called for more competition in the sugar industry, review of the legislative framework, opening up the sector for more competition, and bringing efficiency on part of the millers.