Mystery around sugar

Prime Minister Shaukat Aziz presided over a meeting last Thursday to review the sugar situation, where it was decided that the sugar mills would not be allowed to hold more than 25 percent of their production at any given time. The decision, of course, has been taken in view of the recent sugar crisis and to ensure that shortages and price hikes do not recur.
It makes good sense, but cannot be implemented right away. As it turns out, the government had been relying on the fortnightly reports put out by the Pakistan Sugar Mills Association (PSMA) for information regarding production and sales figures and stock position, etc; that information is not available anymore. At a recent meeting in Lahore, PSMA resolved to stop issuing the reports while it accused the government of "maligning the industry".
Notably, the last such report, which covered the fortnight ending February 28, showed that the mill owners had unsold stocks of 1.493 million tonnes. Also, it mentioned the names of some mills that had held back 65 percent of the sugar they had produced. In one instance, only 14.9 percent of about 24000 tonnes of the total production had been released for sale.
No wonder, recent weeks saw serious sugar shortages and soaring prices, an angry public and a very worried government trying to tide over the crisis by releasing sugar from its own buffer stocks and easing imports. It also ordered a NAB probe into the crisis, which according to PSMA amounted to "maligning the industry", only to abandon the action at the risk of inviting a chorus of public and press criticism against itself. It is rather shocking that the government should have relied on the industry reports rather than to use its own machinery to collect the relevant data.
For a long time, it did have a supervised reporting system in place when excise inspectors determined duty on the basis of stock clearance at the primary source. Excise duty, being a punitive tax aimed at discouraging consumption, was rightly done away with and replaced by Sales Tax. However, the need to determine the nature and volume of activity in the sugar industry through an independent source was ignored. The PSMA members who supplied the information on a voluntary basis could have resorted to figure manipulations - some may have actually done that. The intention here certainly is not to suggest that all PSMA members are prone to misstate the information required of them, only that such a risk exists.
Now that matters have come to a head, the issue calls for a serious rethink. All the more so in view of the fact that the Monopoly Control Authority (MCA), after conducting a study a few months ago into the affairs of the sugar industry, on the Prime Minister's direction, came up with the conclusion that the sugar mills had formed a cartel to fix arbitrary prices. It had suggested some punitive measures against the 'cartel', but failed to pursue the matter. There are lessons to be learnt from that exercise, the recent sugar crisis as well as the ensuing PSMA decision to discontinue its periodic status reports. The least the government needs to do is to employ its own resources to figure out what is going on in the sector so as to be prepared to deal with any eventuality.