Members of Pakistan’s sugar industry have had a tough couple of months. For starters, there has been increasing heat on the position of sugar in the country’s agricultural mix.
Earlier in the month, Punjab Assembly Speaker Malik Muhammad Ahmed delivered a scathing indictment of the vested interests that have allowed politically powerful sugar barons to run amok with this water guzzling crop, edging out important crops like cotton. The speaker’s candid comments during a session of the house are an indication of just how fed-up many have become of how coddled the sugar industry is, especially since his own party leadership are some of the most prominent sugar mill owners in the country.
On top of this, the Pakistan Sugar Mills Association (PSMA) was also the site of a rather ugly battle for the position of the association’s chairman, with the matter eventually being settled by the Director General of Trade Organisations (DGTO).
So what is going on?
The election
Matters kicked off pretty much as they normally do. The Pakistan Sugar Mills Association (PSMA) is another one of the many industry associations that exist in the country to lobby and advocate for their particular sector. Much like the rest of these associations, the PSMA has its own constitution and governing laws. One of the central tenets of this is that the position of chairman is rotated amongst the different regions of the PSMA.
Which is why on the 7th of October this year, PSMA Khyber-Pakhtunkhwa (KPK) elected Abbas Sarfaraz Khan as the Central Chairman of PSMA for 2024-2026. Mr Khan is one of the most powerful sugar barons in the country, and definitely the most powerful one in KP, owning at least four of the six mills in the province. He is a direct descendant of King Dost Mohammed Khan of Afghanistan. He was also a caretaker federal minister.
But there was a problem with his election. Only a few days later on the 10th of October, PSMA (Central) issued a press release, according to which, PSMA had elected a new Chairman at a meeting of its Executive Committee of the Association. The official press further stated that through voting, the opinion of the Members of the Executive Committee was sought for the vacancy of the Chairman. Six out of nine executive members voted in favour of Faisal Ahmed Mukhtar who was elected by majority vote. The press release has further claimed that the General Body of the association appreciated the decision of the executive committee and congratulated the new Chairman Faisal Mukhtar.
This naturally was not popular with the KP region of the association. They immediately took the matter to court, sending letters to the Registrars of SECP and DGTO.
According to the letters “under instructions from and on behalf of our client Rizwan Ullah Khan, Chairman KPK Zone, All Pakistan Sugar Mills Association and the member of Central Executive Committee, it is reported that as per principle of rotation of the Association, Abbas Sarfaraz Khan of Chashma Sugar Mills Limited from the KPK Zone has been elected as the Chairman of Pakistan Sugar Mills Association (Central) for the period 2024-26. A copy of the announcement of October 7, 2024 made by the Election Commission has also been shared with the Registrars of both Regulators.”
The matter was taken up by the DGTO, an arm of the Commerce Ministry and Securities and Exchange Commission of Pakistan (SECP). This body declared the election of Central Chairman, Pakistan Sugar Mills Association (PSMA), Faisal Ahmed Mukhar for the term of 2024-26 null and void and directed the Association that Chairman PSMA shall be elected by all members of the Executive Committee of PSMA.
The DGTO found that the election of Chairman PSMA (Central) was not supervised by the Election Commission as required under Rule 21 of the Trade Organisations Rules, 2013 and the provision of rotation under Article 18 (a) (iii) of Memorandum of Articles of Association has not been followed.
Following this, on the 21st of November, the PSM elected Abbas Sarfaraz Khan from Khyber Pakhtunkhwa (KPK) as its new Central Chairman for the term of 2024-26. According to a brief profile on the Wall Street Journal, Abbas Sarfaraz Khan is a businessperson who has been at the head of 5 different companies. Presently, he holds the position of Chairman for Chashma Sugar Mills Ltd., Chief Executive Officer & Executive Director at Premier Sugar Mills & Distillery Co. Ltd., Chief Executive Officer & Non-Executive Director at Arpak International Investments Ltd. and Chief Executive Officer for Syntronics Ltd. Abbas Sarfaraz Khan is also on the board of seven other companies.
However, there continue to be concerns regarding this election as well. Sources from within the PSMA have said that the election commission appointed for the PSMA elections 2024-26 have displayed a contradictory stance.
For starters, the original stance was that the election process had been completed on 30th September, 2024 and a new Election Commission was mandatory to be constituted under the rules. This very much did not happen. Rather than following this, on the very next day, the same election commission, under an illegal election schedule, declared Mr. Abbas Sarfaraz Khan was elected chairman of the association. This was done without even fulfilling the requirement of becoming a member of the executive committee of Khyber Pakhtunkhwa region. It may be noted that the majority members of the executive committee of the association have filed an appeal before the notified cabinet committee against the decision of the DGTO dated November 15th.
Powerful players
The ongoing drama is taking place in what is possibly the most politically powerful industry in all of Pakistan. Almost all of the 91 sugar mills in the country are owned by household name politicians and their families, all of whom belong to different political parties.
Most sugar mill owners are well known politicians who have had the good fortune of being elected to govern the country on a number of occasions. Prime Minister Nawaz Sharif, his family and relatives own the Abdullah Sugar Mills, Brother Sugar Mills, Channar Sugar Mills, Chaudhry Sugar Mills, Haseeb Waqas Sugar Mills, Ittefaq Sugar Mills, Kashmir Sugar Mills, Ramzan Sugar Mills and Yousaf Sugar Mills. The Kamalia Sugar Mills and Layyah Sugar Mills are also owned by PML-N leaders.
Former President Asif Ali Zardari’s family and PPP leaders are said to own Ansari Sugar Mills, Mirza Sugar Mills, Pangrio Sugar Mills, Sakrand Sugar Mills and Kiran Sugar Mills. Ashraf Sugar mills is owned by PPP leader and former Zarai Tarraqiati Bank Limited (ZTBL) President and current PCB Chairman Chaudhry Zaka Ashraf.
Former Federal Minister Abbas Sarfaraz from Khyber Pakhtunkhwa (KP) is also in this list. Nasrullah Khan Dareshak owns the Indus Sugar Mills while former Secretary General, Pakistan Tehreek-i-Insaf and current IPP leader Jehangir Khan Tareen, has two sugar mills, the JDW Sugar Mills and United Sugar Mills. PML-Q leader, Anwar Cheema, owns the National Sugar Mills. Senator Haroon Akhtar Khan, special assistant to the Finance Ministry on Revenue, owns the Tandianwala Sugar Mills while Pattoki Sugar Mills is owned by Mian Mohammad Azhar. Former Governor Punjab and currently a prominent figure in the PPP, Makhdoom Ahmad Mehmood is a major shareholder in JDW Sugar Mills. Chaudhry Muneer owns two mills in Rahimyar Khan district and former deputy PM Chaudhry Pervaiz Elahi and former Minister of State for Foreign Affairs, Khusro Bakhtiar have shares in these mills.
The rise of the sugar barons
Much like many other industries in the country, partition meant a new beginning. In August 1947, there were only two sugar factories in the newly minted state of Pakistan. Most of the sugar mills set up in the colonial era were on the Indian side of the border, and the two in Pakistan were not nearly enough to meet domestic supply.
This was an opportunity. For the first few years of the country’s existence sugar had to be imported which was a major drain on a new state with very little trading power. At the same time, sugar was a high-demand commodity in the subcontinent and plenty of sugarcane was grown in the new state. The 1947-48 production numbers for sugarcane in Pakistan were over 54 lakh tonnes. Nearly 75% of this sugarcane was grown in the Punjab. Since at the time the country’s landed elite were also its political elite, it became clear that many of these landowners that were growing sugarcane would now set up sugar mills, process the sugar and make more money.
The experiment was successful. Keeping in view the importance of the sugar industry, the government setup a commission in 1957 to frame a scheme for the development of the sugar industry. In this way the first mill was established at Tando Muhammad Khan in Sindh province in the year 1961. By 1962 there were six mills in the country and in 1964 the Pakistan Sugar Mills Association (PSMA) had been established and almost every single sugar mill in the country had a member of parliament on its board of directors.
The interests of the sugar industry were disproportionately represented in the legislature and the political patronage that came with this allowed the industry to boom. According to a report of the Competition Commission of Pakistan, the number of mills increased to 20 by 1971 during a period when cane cultivation was incentivized in Sindh through establishment of sugar mills. The size of the industry further increased to 34 by 1980.
But by this point mills were facing a problem. Pakistan’s sugarcane was uncompetitive. Production was low compared to the global average yields and so was sugar extract percentage. This meant imported sugar could actually compete with the local product. To counter this, government policies placed tariffs on imported sugar and even banned it while giving subsidies to local sugar mills. As a result, the number of mills grew and so did the number of farmers growing sugarcane.
In fact, the number of mills grew at such a rate that the government eventually had to stop giving licences because of capacity maximisation issues. Through political patronage and protection through tariff and non-tariff restrictions on imports and generous subsidies, Pakistan went from 41 mills in 1987 to 91 by the mid-2000s before a ban was placed on the establishment of new factories due to excess installed capacity.
During this era in particular the Sharif family was prominent in entering the sugar mill business. They started with the Ramzan Sugar Mills and continued on to establish Ittefaq Mills and many others. There was a crucial difference however. In the beginning, many of the mill owners had also been farmers. The Sharifs were hard-boiled industrialists with not a single green thumb in the entire family. This was also part of a rising trend of non-agriculturalists with political clout entering the country’s sugar industry. If one were to believe what was said in those days, the annual profit from one sugar unit in that period used to be more than enough for setting up a new one.
Up until the early 2000s there was no restriction on establishing a new sugar mill. However, around 2005 the government of Punjab decided that new mills could not legally be established. One reason for this was that a lot of the mills coming up were being set up in South Punjab near Muzaffargarh. This was a major part of Pakistan’s cotton belt — which the country’s largest export oriented sector, textiles, relied heavily on. This essentially froze the sugar industry, leaving it entirely in the hands of around 40 individuals and their families.
But what about the sugar crop?
And this is what it all boils down to. The sugar industry in Pakistan has been propped up on friendly policy making. Even this year in Sindh presents an alarming picture. According to a recent report in Dawn, the Sindh government has yet to notify the sugarcane’s indicative price for the 2024-25 sugarcane crops.
“No, the rate is not yet fixed,” said a Sindh agriculture officer while anticipating that sugar mills would be starting crushing by Nov 21 under the federal government’s decision. This decision, which allowed sugar to be exported by mills, also linked it to the commencement of crushing by this date.
Thirty-one sugar mills crushed cane in Sindh to produce 2.02m tonnes of sugar in 2023-24. A total of 19.28m tonnes of sugarcane were crushed, recording a 10.37pc recovery percentage. When compared with the 2022-23 crop season, 16.79m tonnes of sugarcane crop were crushed to produce 1.74m tonnes of sugar with a lesser recovery percentage of 10.16pc. This lesser acreage, as well as recovery in 2022-23, was apparently attributable to losses to crops in 2022 flooding and heavy rainfall. The price in Punjab has also not yet been notified by the provincial government. Punjab’s sugarcane producers like Khalid Mehmood Khokhar, President of Pakistan Kissan Ittehad, explains, “It is felt that the Punjab government will not fix sugarcane’s indicative rate and wheat’s support price this year.” Mr Khokhar noted that the cost of production increased this year primarily due to a rise in electricity tariff.
All of this raises the question, away from the politics, how good is sugarcane for Pakistan’s agricultural economy? On the one hand one of the major issues raised over the relocation is that the mills would be moving to cotton districts. The battle between the delicate white lint of cotton and the sugary sweetness of sugarcane is an unexpected but harsh one. Over the past two decades, however, cotton has taken a backseat with farmers shifting in droves towards growing the more profitable but water-guzzling sugarcane. Cotton has fallen out of demand, become internationally uncompetitive, and output has fallen by a whopping 65% from 14 million bales being produced in 2005 to 4.9 million bales being produced in 2023.
Cotton producers are losing interest and prefer crops like sugarcane and paddy while the government continues to be disinterested in reviving cotton. Sindh has seen growth in the sugar industry in cotton-growing areas, especially in Ghotki, where five sugar mills have been set up.
In an earlier interview with Profit, the son of Jehangir Tareen, Ali Tareen, had also agreed that a lot of farmers were shifting from cotton to sugarcane. The reason behind this, of course, is that sugarcane is much more profitable. Because the mills are around farmers, they have someone to sell to, unlike when they grow the cotton crop which is susceptible to disease and harder to sell.
“Rahim Yar Khan used to be a cotton growing area when we set up our mill,” says Ali. “Now it is the biggest sugarcane producing area in the region. That is because we came in and said from the get-go to the farmers that our goal is to have you grow lots of sugarcane for cheap and sell it to us at high rates. Before this, the relationship between the sugar mills and the farmers was that the mills would squeeze the farmers. Eventually, the farmers would simply stop growing sugarcane. And that’s why we provided cash loans, we gave seeds, we held training and sugarcane yield has never been higher,” Tareen told Profit in the earlier interview.
This is another issue. While water scarcity is an issue in central Punjab, many of the mills there had also gotten a bad reputation with farmers. The mills would make the farmers cue for hours to sell their crop and would not pay them on time. Deferred payments actually became a major bone of contention between farmers and mill owners.
But generally, sugarcane is a much safer bet than cotton. It is no wonder then, that sugarcane is seen as a ‘better’ alternative. Not only is it sturdier in the face of fluctuating weather, it requires less manpower in the fields.
