The Competition Commission of Pakistan (CCP) has finalised its inquiry report on sugar industry and have accused Pakistan Sugar Mills Association (PSMA) of maintaining cartels among its own members.
The CCP report highlighted the fact that PSMA was maintaining an illegal balance between efficient mills which are producing sugar around Rs43 per kilogram and inefficient mills which are producing at Rs78 per kg and helping them remain in business on government subsidies.
On its part, the PSMA rejected the CCP inquiry report, saying business interests of all sugar mills were different and it’s an impractical notion to assume that all units would agree on a single-point agenda.
According to the CCP, the search and inspection of the PSMA Punjab zone revealed that a senior official of JDW Sugar Mills was operating a coordination network when its office was searched on Sept 25. Computers and smart phone of the JDW group director was confiscated and their forensic analysis was conducted by the Federal Investigation Agency. One of the WhatsApp groups “PZ” in the group director’s smart phone revealed details of cartelisation, collusive activities and even discussions related to future planning to keep the sugar supply limited as a result its prices continued to rise in the country.
The CCP report said the sugar price was Rs60 per kg in February last year which rose to Rs98 in September this year, an increase of Rs38 per kg. An increase of Rs18 in the price was witnessed in different stages only after the export of sugar was allowed.
The data obtained from the PSMA office showed that 12 zones were created in Punjab based on the production capacity of sugar mills and not on their geographical locations.
The report highlighted that sale committees comprising one member from each zone were established to meet periodically to keep the supply restricted, while the share of each zone versus total production in Punjab was mapped out. “This shows that the coordination in sales was based on share in production and stock position of each mill in each zone was monitored on a monthly basis,” the CCP report said.
The documents obtained by the CCP also showed that the PSMA has been monitoring the production, consolidation of stocks and sharing sensitive commercial information to limit supply to the market since 2012.
One document revealed that the PSMA Punjab intervened in a tender for 100,000 tonnes of sugar floated by the Utility Stores Corporation in 2010 and asked the USC to lift certain amount of the commodity from various zones at an average price. These actions were beyond the mandate and responsibilities of the association as these restricted a fair competition in the sector, forcing the domestic, commercial and industrial consumers to pay higher prices for the commodity.
The CCP has noted that due to high cost of sugar the confectionery industry has been rendered uncompetitive too.
The PSMA Punjab had even deceived the government in May 2020 by giving high stock position figures and retracted in July that the earlier figure was incorrect, which prevented the timely import of sugar by the government.
The CCP will start issuing show-cause notices to the sugar mills and the PSMA to respond to the allegations levelled in the inquiry report.
PSMA central chairman Iskander Khan rejected the CCP probe report, saying business interests of all sugar mills are different and it is an impractical notion to assume that all units will agree on a single-point agenda.
“Under these conditions, establishing a cartel is not possible and the CCP has failed to understand the ground realities while conducting the inquiry,” Mr Iskander said.
“We support the government and initiatives of the prime minister to reduce sugar prices in the country, but the key hurdle was the improper decision making by bureaucrats; the CCP has also failed to take note of any indecision or wrong decision by officials of the federal and provincial governments,” the PSMA chairman regretted.
