ISLAMABAD: The Competition Commission of Pakistan (CCP) has completed its inquiry into alleged anti-competitive activities in the sugar industry, and recommended initiating proceedings against the violations.
“Despite an abundant supply, sugar is not available to consumers at an affordable price. It cannot be ignored that the related industries such as beverages, confectionaries, etc. – which are the largest consumers of sugar – are also affected due to lack of competition in the sugar industry. International competitiveness has also suffered owing to the higher cost of production,” the commission noted in its report.
“To ensure its availability to consumers at a reasonable price, a large amount of public money is spent on subsidising sugar through Utility Stores Corporation (USC), Ramzan bazaars and imports.”
As per the findings of the CCP report, there is a huge disparity in the structures of efficient and inefficient sugar mills. However, due to the existence of cartels, inefficient mills remain protected.
“Therefore, it is in the public interest to initiate proceedings under Section 30 of the Act for the violations mentioned in this report,” the CCP recommended.
It is pertinent to mention that the federal government had earlier ordered relevant departments to launch formal investigations and, where necessary, take “penal, corrective and mitigating measures” against the “sugar cartel” implicated in the commission’s report.
Special Assistant to Prime Minister on Accountability and Interior Shahzad Akbar had writen letters to CCP, Sindh chief secretary, Punjab chief secretary, State Bank of Pakistan (SBP), Federal Investigation Agency (FIA), Securities and Exchange Commission of Pakistan (SECP) and Federal Board of Revenue (FBR) to “undertake a comprehensive investigation” into the matter.
The CCP, in its meeting held on December 19, 2019, authorised an inquiry, under Section 37(1) of the Competition Act, 2010, into “Possible anti-competitive activities in the Sugar Industry” and constituted a committee.
During the inquiry process, CCP observed that most of the sugar mills established in the early 1950s and 1960s were still operational despite outdated technology, low recovery ratio and very high cost of production. This shows that mills were not competing on the basis of efficiency and better technology; rather, each mill appeared to be somehow compensated through a managed operation of the industry.
According to CCP report, it was observed from analysis of cost information that cost of production varies from mill to mill due to various factors, which included different recovery ratios, economies of scale, conversion cost and the purchase price of sugarcane.
Even the mills located in the same area have different cost structures. The analysis of the cost of production of sugar for the year 2018-19, shows that within the Punjab province, the manufacturing cost varies between Rs43.61/kg to Rs78.60/kg. In Sindh, the cost varies between Rs47.20/kg to Rs66.74/kg.