The government and the sugar industry are in a confrontation. During Covid-19 first wave, coinciding with Ramazan, sugar and wheat disappeared from markets in Pakistan last year. When both the products did show up, they had become untouchable because of high prices. Hardly had this hide and seek settled that the oil industry fell parched of petrol, which also registered a spike in prices on the refill.
Two commissions were formed on the orders of the prime minister to identify the culprits behind the sugar and oil scams. Both the reports are out; however, despite Imran Khan’s dig-in position to punish the mafias, no action has been taken against anyone. So much so that the so-called oil mafias are now hardly heard of. The only mafia left in the ring to battle the government is the sugar industry.
The sugar industry is in litigation with the government on sugar pricing. Rather than allowing market forces of demand and supply to determine the price, the government is fixing the price of sugar through its ministry of industries and production.
The idea behind the intervention is to obstruct the malpractices of hoarding, excess export and underreported crushing — all presumably done to create an artificial shortage that leads to higher prices. While dismissing these allegations, the sugar industry is demanding of the government to treat sugar as any other commodity and let the market decide its price. Another irritant making the issue of pricing more bothersome is the failure of the government to differentiate between the usage of sugar as industrial raw material and as a staple food. Putting both categories in one basket could make the survival of the industry detrimental.
Sugar industrialists could be rich people; however, they differ in strength and power. Similarly, a sugar plant in one region differs from the one installed in other areas. Some mill owners have the latest machinery while others are still using a less advanced version. There are small, and big businesses/factories/setups in every industry, and the sugar industry is no exception. The size of production also varies among millers. Therefore treating the entire industry with a single sweep is like punishing the entire clan for the misconduct of a few members. Nawaz Sharif and Asif Zardari are neither the leading players in the sugar industry, nor is Jahangir Tareen the only protagonist. The Tareens may have more clout because of the number of mills the group owns; it does not make it the architect of the entire industry.
If Imran Khan thinks that the Sharifs, Zardaris and Tareens have minted money through malpractices in sugar businesses, he might be right. But if he thinks he should take the entire industry down to punish these three, he is grossly wrong. The practice of witch-hunting has already undermined the entire concept of accountability. Not that the sugar industry has not been manipulating prices or was not taking advantage of its influence on the government apparatuses, which reminds one of the revelations made in the sugar commission report about more than Rs20 billion subsidies allocated to the sugar industry in 2017. The problem is that reforms through coercion will only address the symptom and not the cause.
There is no one fit-all solution to price manipulation in any industry. The confrontation between the sugar industry and the government will only destroy Pakistan’s economic prospects in the long run because of food import bills already on the rise. In its recent order, the courts have stopped the government from setting sugar prices. There would be two benefits of this decision: One, the supply of sugar would increase; two, the sugar mills will be incentivised to increase production in the coming crushing season. Both the steps will bring the prices down.
The irony is that the Competition Commission of Pakistan has also been asking the government to stop fixing sugar prices. Part of this dumbness lies in Imran Khan’s aversion to corruption, while the rest is because of the wrong assessment of the industry’s composition and its impact on the overall economy.
The litmus test of the government does not lie in fixing price; it lies in implementing the sugar and the oil commission reports finding and punishing the culprits. Is the government ready to cross this redline?
Published in The Express Tribune, August 5th, 2021.
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