Sugar cartels

EDITORIAL: Who’s even surprised that an investigation by the Competition Commission of Pakistan (CCP) has found that the Pakistan Sugar Mills Association (PSMA) has been maintaining cartels within its members to protect inefficient mills as well as keep the commodity’s price elevated all the time that ordinary people have been struggling to afford it? Some of the mills that have long been involved in cartelisation, right under the nose of the government of course, have done it so effectively and with such success that they could write a book on exploiting farmers, stealing from consumers, manipulating the price and leaving the government machinery completely helpless; all to make sure that the seasonal sharp spike in their profits is protected. The investigation also found that PSMA was maintaining an illegal balance between efficient sugar mills, with production cost of about Rs43 per kg, and inefficient ones that produce sugar at Rs78 per kg. PSMA has rejected the probe, quite as expected, and even accused CCP of not knowing how to carry out such an inquiry. The body has also publically supported the prime minister’s call for controlling sugar prices, just for good measure, even though it might soon be proved that it does all it can to find ways of keeping prices on the higher side.

Sugar is definitely among the most complicated and bizarrely run industries of Pakistan. Perhaps the biggest problem is that the largest group of sugar mill owners comprises rather influential politicians, which reduces the chances of success of any set of reforms right at the beginning. One thing most mills have in common is limited storage capacity, which is why they look to export whenever stocks start to overflow. But since most sugar mill owners also occupy the halls of power, it is not too difficult for them to arrange export subsidies to make their product competitive in the international market. Then when a shortage arises at home, prices simply have to be raised. This cycle goes on and on and, for some reason, nobody has yet given any thought to diverting the money from subsidies towards improving storage capacities. Perhaps it is the ease with which they are able to exercise their considerable influence and keep the subsidy running that prevents them from looking for ways to improve their stock holding ability. In a way these mill owners don’t even need to go through the trouble of forming cartels really since their principal profession, politics, gets them all the access to power that they need. For if one group among them is not in power at any point in time, you can be certain that another with a similar set of interests is.

All this makes for a very mysterious situation. Even the prime minister, who promises at least once a month to use all the state’s might to crack down on all such cartels and mafias, is now clearly getting frustrated because, try as he might, he’s just unable to even get off the mark. An idea could be prohibiting individuals that own sugar mills or are involved in this particular industry from entering politics. But there’s a slim chance of getting anything even vaguely resembling such an idea from a House full of feudal lords, some of whom occupy some of the highest offices of the state. As things stand, these people are in the habit of making arrangements that allow land meant for other crops to be used for sugarcane cultivation. Then together they fleece farmers, consumers, and the government alike.

This situation cannot be allowed to persist. Somebody will have to take this particular bull by the horns someday or the entire system will collapse before too long. And this government has very good reasons to sort this mess out sooner rather than later. It not only needs to turn around the industry and the way it is run, but it also desperately needs to rationalise prices to protect its own interests. People are fast losing sight of whether they are angrier at the high prices or the government’s utter inability to do anything about them. And unless it is able to put a lid on prices very soon, it will have only itself to blame when the combined opposition beats this drum ever louder at its protests that are meant to bring it down.

Copyright Business Recorder, 2020