Black market: ECC uncovers sugar subsidy scam

Says people denied benefit of govt’s subsidy policy.

ISLAMABAD:

The Economic Coordination Committee (ECC) has caught a sugar subsidy scam where the Utility Stores Corporation (USC) sold the sweetener at higher prices, denying consumers, particularly the low-income class, benefits of the subsidy.

“There have been reports about the black market of USC sugar for taking advantage of the price difference of Rs5 per kg,” noted the ECC – the top economic decision-making body – in a meeting held on April 25.

“People could not receive complete benefit of the government policy, though it released the subsidy to make up for the price difference.”

From July 2012 to December 2013, the subsidy on sugar sales through USC outlets stood at Rs22.2 billion including Trading Corporation of Pakistan’s (TCP) procurement charges of Rs8.6 per kg and USC’s incidental charges of Rs7.53 per kg.

Participants of the ECC meeting pointed out that under the Rules of Business 1973, the Ministry of Industries and Production had the responsibility to keep a close watch over general price trends and supply of essential commodities including sugar.

In 2008-09 and 2009-10, the country endured an unprecedented shortage of sugar as domestic production stood below consumption.

In 2008-09, sugar mills produced 3.13 million tons compared to demand for 4.2 million tons. Next year, the production was almost the same at 3.14 million tons against consumption of 4.2 million tons.

Keeping in view this shortage, according to the meeting participants, the government decided to import sugar through the TCP and sell at subsidised rates through USC outlets.

The TCP imported 200,000 tons in 2009-10 and 2010-11, which was sold at USC outlets at a price Rs10 per kg less than market rates in line with the ECC decision.

Later, taking advantage of surplus production, the TCP started purchasing sugar from domestic mills in 2011-12 and 2012-13. It bought 1.35 million tons and the commodity was sold at USC outlets at a price Rs5 per kg lower than market prices.

At present, the TCP provides 40,000 to 50,000 tons of sugar to the USC every month.

More-than-required production over two years kept sugar prices in the range of Rs50 to Rs53 per kg, which was well within the purchasing power of consumers, they said.

“USC purchases all essential items such as flour, pulses, ghee, etc through open tenders and there is no economic or logistical logic to exclude sugar from its purchase list,” a meeting participant remarked.

The Ministry of Industries and Production suggested that the USC could be allowed to sell sugar at open market prices and buy directly from the mills without involvement of TCP. The ECC approved the proposal of direct purchase from the mills.

The ECC also stopped the TCP from sugar purchase and decided to form a committee that would review the stock of 199,000 tons and prepare a report for its consideration in the next meeting.

Published in The Express Tribune, May 11^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.