The not-so-sweet truth

Too much sugar leaves a sour taste. With sweet subsidies getting sweeter by the season and supplemented with syrupy tariff barriers, the sugary mix was to turn bitter — eventually. And that did happen. For years and years, sugar millers thrived on special privileges granted by the government at the cost of the national exchequer. Just the last year, the rise and rise in the price of the white commodity due to an incomprehensible short supply led to a hefty hundred billion rupees moving from the paltry pockets of ordinary people to the swelling coffers of the sugar industry which is concentrated in hands fewer than one’s fingertips.

Let’s see who these privileged few dealing in the sweet stuff are: just nine families own more than half of the sugar mills operating in the country, and just six industrial groups account for half of the total national production. What paves the way for political manipulation to cartelise the business by influencing policy and administration is that some of these six industrial groups are fully or partially owned by a parliament member — current or former. They may be in warring political camps and have often been seen hurling jaw-breaking, verbal salvos at each other during TV talk-shows, but they all are one when it comes to safeguarding their business interests. And such is the muscle of this strange political union that one cannot obtain a licence from the government to launch a sugar mill unless they are politically affiliated.

The very many special favours and privileges enjoyed by this politically powerful sugar mafia include: 1) key role in determining the support price of sugarcane and the rate for procurement of the crop; 2) import barriers in the shape of regulatory duties and tariffs meant to keep foreign producers out of the competition; and 3) export subsidy which constitute the most precious of the privileges in that when the price of the sweet commodity rises in international market and when surplus stocks are also available in the country, sugar millers not only get export permission but are also granted subsidy for the purpose. And in the event of a shortage of the commodity within the country in the wake of the export, the resulting price rise brings in further windfall. All that, thoroughly legally!

With so much to benefit from, it’s no wonder why things have thus far fallen in place for these sugar barons — like magic. With all regulatory institutions conniving with them, they virtually had free rein. They thus manipulated the game in their favour. They colluded to raise the cost of production. They controlled the rules and regulations to their advantage at the cost of the market and the consumer. They tricked the government for evading taxes by making use of paper slips to record transactions; maintaining fake accounting records for the government; over-invoicing exports and under-reporting the production volume.

Too much sugar leaves a sour taste. A 30% rise in the price of sugar in just six months — between December 2018 and June 2019 — prompted the government into ordering an inquiry. Led by FIA, the inquiry has laid everything bone-bare. What thus far remained disputed as mere allegations is now part of an official report spread over 32 pages. However, the ball is now in Prime Minister Imran Khan’s court, and the public expects action. As for a solution over the sugar business, the government must deregulate, remove subsidies, and ensure competition in the market. It must do what it has done in case of wheat — free up the imports.

Published in The Express Tribune, May 30^th, 2020.

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