Mills earn billions by selling sugar to USC at higher price

Govt suffers loss in terms of subsidy; ECC decides to conduct special audit

Zafar Bhutta February 17, 2017

ISLAMABAD: Sugar barons have pocketed billions of rupees in collusion with the top management of Utility Stores Corporation (USC) by selling the sweetener at higher-than-prevailing market prices, which have caused heavy losses to the national exchequer and consumers.

The disclosure was made in a meeting of the Economic Coordination Committee (ECC) of the cabinet held on February 13, show documents.

During the huddle, the USC managing director told committee members that the chain of state-owned stores - which sell subsidised goods, particularly edible items - purchased sugar from mills for Rs73 per kg and sold at Rs65 per kg.

The revelation upset the ECC members, who called for undertaking a special audit of the utility stores.

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Earlier, the ECC in its meeting on December 28, 2016 was informed that the Inter-Ministerial Committee, constituted by Prime Minister Nawaz Sharif, had assessed price trends in international and domestic markets and noted that sugar rates dropped from $597 per ton in September 2016 to $490 on December 20, 2016 in the world market.

The committee noted that the sugarcane price had remained stable at Rs180 per 40 kg in Punjab since 2014-15 and was slightly increased by Rs10 in Sindh in the current season.

However, according to the Sensitive Price Indicator, the retail price of sugar in the domestic market during the week ended December 15, 2016 stood higher at Rs62.61 per kg compared with Rs54.12 in December 2014 and Rs57.16 in December 2015.

This showed that USC purchased sugar at the higher price of Rs73 per kg compared to the market rates, which caused a loss not only to the public exchequer, but consumers were also fleeced.

ECC Chairman Ishaq Dar in the February 13 meeting noted that sugar was being sold in the open market for Rs65 per kg. Commerce Minister Khurram Dastgir echoed a similar view, saying the sugar price a couple of days ago stood slightly above Rs65 per kg.

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The ECC members dismissed USC’s claim about the grant of Rs8 per kg subsidy on sugar sale, terming it unjustified. They were of the view that there was a need to determine the reason behind the enhanced cost of sugar compared to the prevailing market price.

The ECC decided to conduct a special audit to assess the amount of subsidy being claimed by USC for 11 essential items and bring the case back to the committee for further review.

It also directed the Finance Division to ask the Auditor General of Pakistan to carry out the special audit in the next 15 days. The Finance Division will submit a report for consideration of the ECC.

The Ministry of Industries and Production, on its part, sought the ECC’s approval for the release of Rs1.03 billion to enable USC to maintain prices of the 11 essential items as per directives of the Prime Minister’s Office.

Published in The Express Tribune, February 18th, 2017.

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