Sugar, wheat crises: Inquiry reports leaked to TV anchors?

The Prime Minister's top aide on accountability formally described sugar mill owners as 'sugar mafia'. This was gauged from the cabinet documents seen by Business Recorder, which also indicate that Inquiry Reports on sugar and wheat were leaked to a few TV anchors before it was released to the media.

On April 7, 2020 Prime Minister Imran Khan briefed the Cabinet on the inquiry reports on sugar and wheat. The Prime Minister referred to his instructions about fair and transparent enquiries and the resolve to make the inquiry reports public which was unequivocally expressed in the Cabinet meetings as well.

The Prime Minister vehemently rejected the false impression being created by some sections of the media and the opposition that release of report to public was prompted by its leakage to few TV anchors. The decision to expose the sugar and wheat mafia was part of the commitment made by him to the people, which included divulging some details of the forensic report due on April 25, 2020. The punitive and remedial measures required, he stated would be decided after the forensic report by the Inquiry Commission is released.

The Special Assistant to the Prime Minister on Accountability, while apprising the Cabinet on chronology of events, pointed out that the Inquiry was ordered in January this year and in February and March replies to the questions raised were received and finally on April 3, 2020, the Prime Minister considered and directed to make the inquiry reports public and on 4th April 2020 it was made public. However, few prominent media anchors were given advance copies.

Explaining the subsidies given to the Sugar industry on export, he said that the previous government had given a subsidy to the tune of Rs, 20 billion in 4 years. During the tenure of the present government, no subsidy had been given by the federal government but Punjab government did allocate an amount of Rs. 3 billion for subsidy out of which Rs. 2.4 billion was utilized. He further explained that in 2017 the previous government announced a subsidy of Rs. 20 billion at the rate of Rs. 20 per kg out of which Rs. 14.7 billion was drawn in which federal government gave subsidy at the rate of Rs 10.70 per kg. Sindh chapter, however, provided the balance and it gave Rs. 20 per kg as initially contemplated.

He stated that no such subsides were given by this government at federal level. He further stated that out of the total exported sugar 68.7 per cent was reportedly exported to Afghanistan and rest to other destinations. The export to Afghanistan is somewhat complex as no Letter of Credit is opened unlike other destinations. Therefore, the forensic report by reconciling data of SBP and FBR juxtaposed to the sugar quantity released for the purpose by mills can only reveal the exact situation.

The Cabinet was further briefed that Sugar Advisory Board in its meeting had recommended export of 1 million tons of sugar as according to estimates 2 million tons of excess sugar was available in the country. The ECC approved the recommendation, without allowing any subsidy, so that Mills could be facilitated in clearing old stocks and the purchase of sugarcane from the farmers for the new crushing season was not disrupted.

The permission to export was also conditional as it was decided that in case of any price increase, the Sugar Advisory Board would come back with the proposal to ban the export of sugar. The Cabinet had ratified the decision of the ECC primarily in consideration of the consequences on the poor farmers.

It was further explained that twin decisions of making export of 1 million ton and without giving subsidy by federal government were taken through due institutional diligence and through recommendations by Sugar Advisory Board which were collectively approved by the ECC to be finally endorsed by the Cabinet. Later on, provinces decided to give subsidies at their respective levels because there was a specter of sugarcane farmers embarking on strike. It was also mentioned that further institutional arrangement was made to supervise the ongoing local supply and process of sugar during the period of export of sugar.

The Inter-ministerial Committee headed by Advisor to PM on Commerce was to chair this Committee and keep an eye on situation created by export of sugar. It was added that Inter-ministerial Committee regularly met to do the job and the price hike of sugar was due to the increase in the rate of sugarcane as well as due to the raise in sales tax by the government. It was also stated that the Sugar Advisory Board had recommended the permission to allow export of 1MT sugar in wake of the USD 1 billion package agreed with the Chinese government under which it was envisaged that China would import Rice, Cotton Yarn and Sugar from Pakistan duty free. It was also brought to the notice of the Cabinet that the sugar mafia had been conveying threats to increase the price of sugar to Rs. 110/- during Ramazan. The Cabinet took a serious note of the intimidating tactics and resolved to take strict action against those found involved in any manipulation of sugar price.

An alternate view was expressed that the current sugar policy was flawed and needed to be changed because it had been formulated in isolation by ignoring the international demand, supply and prices which might be lower than domestic prices. As a result, sugar produced domestically is dumped and government is 'blackmailed' to provide subsidies for export to clear the glut otherwise the sugarcane will not be procured for the next season and farmers will go on strike.