CCP unearths cartel in sugar industry

Sugar barons fleecing consumers by making cartels at three different tiers, making them liable for maximum penalty.

ISLAMABAD: Sugar barons are fleecing consumers by making cartels at three different tiers, which makes them liable for the maximum penalty, says the findings of the Competition Commission of Pakistan (CCP).

Official sources told The Express Tribune that according to the provisional order of the CCP, the Pakistan Sugar Mills Association (PSMA) had made a three-tier cartel in the industry. However, the CCP cannot make its order public as the PSMA has obtained a stay order from the Sindh High Court (SHC), which is present in the Registrar’s Office.

Sources said that violation of the anti-trust law makes the PSMA liable for a penalty of Rs75 million or 10 per cent of the annual turnover, whichever is higher. However, PSMA President Iskandar Khan was not available for comment.

In 2009, the CCP initiated an investigation against allegations of cartelisation in the sugar industry and submitted the order in the SHC in July 2010. The PSMA challenged the CCP’s proceedings in court and obtained a stay order. The CCP then challenged the stay  order in the Supreme Court, which allowed the CCP to submit a report in the SHC but restrained it from issuing a final order.

The CCP’s investigation proves the presence of a strong sugar mafia in the country. Despite ample availability of sugar, it is being sold at Rs125 to 135 per kilogramme against a production cost of less than Rs55 per kg.

Information Minister Qamar Zaman Kaira admitted on Wednesday that 725,000 metric tons of sugar were still available, which was more than the amount required for two months. Without confessing his government’s inability to arrest the culprits, he said that there was no shortage of the commodity but certain influential people were involved in hoarding.

“The record that was confiscated during raids on the offices of the PSMA proved that the members of the association colluded with each other and fixed a minimum support price – a rate at which they bought sugarcane from farmers,” official sources said on the condition of anonymity.

At a second tier, sources said, mill owners submitted joint bids to the Trading Corporation of Pakistan (TCP) for import of sugar, which was designed to keep the strategic reserves. But, the PSMA members foiled the move.

At the third tier, the provisional order states, the government too got involved in the cartelisation as it negotiated with the PSMA to fix sugar prices, which is against the spirit of free market and open competition.

CCP Chairperson Rahat Kaunain Hassan said that the matter was sub judice in a court that “restricts her from commenting on the provisional order”. Responding to a question on the ongoing sugar crisis, Hassan said that the CCP was not responsible for regulating prices. However, “the CCP is closely monitoring the crisis and if collusive behaviour is found, we would take action against those responsible.”

Published in The Express Tribune, November 11^th, 2010.