SAPM on accountability Shahzad Akbar made sugar inquiry report public

 Farmers and consumers were exploited to maximise  profits

Special Assistant of Prime Minister (SAPM) on accountability and interior Shahzad Akbar today in a press conference made the findings of the sugar crisis inquiry public. He said that the prime minister and the Cabinet have declared the report public and it will be available on the Press Information Department (PID) website.

He said today marks an important day. "Neither have investigations been conducted over matters such as these in the past, nor has any government had the courage to make the investigations public."

He said that the report "has some very shocking findings", from sugarcane procurement and sugar manufacturing to sale and exports.

He gives the background on the formation of inquiry report and said that the sugar inquiry commission was set up because there has been a cycle of sugar price increases from December 2018 to August 2019, where prices were hiked up to 33%, which, in rupee terms, translates to Rs 17 per kilogramme.

"In view of the rise in prices, the premier set up a three-member inquiry committee under FIA DG Wajid Zia and which presented a detailed report to the prime minister, wherein problems associated with the sugar industry that were causing price hikes were highlighted." 

He said that DG anti-corruption Punjab and one member each from Intelligence Bureau (IB), Inter-Services Intelligence (ISI), Security and Exchange Commission of Pakistan (SECP) and State Bank of Pakistan (SBP) were made part of the committee.

"This commission worked for a very brief period and submitted a final report to the cabinet and today, a special cabinet meeting was called.

SAPM on accountability further said that "In the meeting, Wajid Zia, the head of commission, presented the report and then the cabinet had a detailed discussion and the cabinet was briefed on the basic points of the report and what recommendations have been included, which I'll share in a bit. I request you all please patiently listen,"

"You can see clearly in this report how a business group has captured this whole industry and that includes institutional capture, regulatory capture, and it has paralysed the entire system and put the ultimate burden on the people," he said.

The role of Sharifs, Jahangir Tareen, Khusro Bakhtiar and Moonis Elahi

SAPM barrister Shahzad Akbar named Shahbaz Sharif's family, Jahangir Tareen, Khusro Bakhtiar and Moonis Elahi while discussing the findings. He said that the company owned by Shahbaz Sharif's family engaged in "double reporting". In 2017-18, the company raked in additional profits of Rs1.3bn and when 2018-19, they earned Rs780 million.

Shahzad Akbar said sugar mills belonging to Jahangir Tareen's group were found guilty of "double billing" and "over-invoicing" as well as "corporate fraud".

Speaking of Khusro Bakhtiar's brother, he said that Omar Shehryar is the one who owns a sugar mill and does not hold political office. "We cannot ask Khusro Bakhtiar to resign from his post (as minister for food security). An inquiry will be initiated against whoever is directly involved."

He said among the mills short listed is Alliance which is owned by the RYK Group. Moonis Elahi has 34% ownership of the group.

SAPM on accountability provided details of the six major parties in the sugar industry,  JDW has 20% (the biggest share), RYK 12%, Al Moiz Group 6.8%, Tanliawal Group 5%, Sharifs Group 4.5% and Omni Group 1.6%.

Akbar said a subsidy of Rs29bn was given to the sugar industry in the last five year. The total income tax of around 88 sugar mills of the country is Rs10bn, after getting a tax refund.

Akbar said that the report "has some very shocking findings", from sugarcane procurement and sugar manufacturing to sale and exports.

Continued looting and exploitation of farmers

The SAPM said that "the first finding which is important in this report is that the farmer, the person who grows sugarcane, was consistently harmed and was looted. Sugar mills systematically paid extremely low prices-lower than even the support prices." He said that with a support price set by the government at Rs 190, the farmers were only paid Rs140 all through 2019.

He further said almost all mills cut down sugarcane weight by 15-30%, which directly impacts the farmers, because by purposefully weighing it lower, the gain goes to the sugar mill owners.

He also said that it was found that some mills had a system whereby rough receipts were used. "Instead of a CPR (computerised payment receipt), farmers are given unofficial receipts which are lower than Rs140." He said that while purchasing, commission agents are used (as middlemen) which allows for sugarcane to be purchased from farmers at an even lower price.

SAPM Shahzad Akbar explained that sugarcane is bought from the farmers on lower prices and the cost is presented higher while recording cost of production.

"This is the most important factor because mill owners show cost of production as higher than support price when, in reality, the commission has obtained evidence through the forensic audit which shows sugarcane is purchased on lower prices and farmers are paid lower prices," he said.

"It is also observed that mill owners engage in unofficial banking with farmers wherein they (mill owners) give advance money to farmers under the category of fertiliser, and in the category, since it is not regulated banking, up to 35% profits are received. "

Cost of production manipulated

"A major finding is manipulation in cost. Ex-mill cost, which is the cost of production was a major point determined by the commission. "According to the report, there has never been an independent assessment of cost of production of 1 kilogramme of sugar ever before today," he said.

He said it was determined that since forever, government institutions rely on the estimate given by the Pakistan Sugar mills Association, whereas it is the responsibility of the government institutions and regulators to determine how much it costs to produce a kilogramme of sugar.

Akbar said a clear difference has been observed in what the commission counted as cost of production and what figures the sugar mill association provided. "I'll provide the figures from the past 3 years presented in the commission report and you can understand," Akbar said.

It's the cost of production on the basis of ex- mill price — it doesn't include the tax — so the cost of production for 2017-18 provided by the sugar mills now and in the past is Rs51 per kilogramme, whereas the forensic audit commission determined this as Rs38, a difference of Rs13.

"Similarly, the cost of production for 2018-19 determined by the sugar mills association — which is not done independently but done by mills themselves — was Rs52.06, whereas the forensic audit commission determined it as Rs40.06. This shows a difference of more than Rs12."

He said that in 2019-20 sugar mill price determination before taxation is Rs62, whereas the price determined by commission is Rs40.04 — a very clear difference.

He said the commission found ‘over-invoicing of sugarcane procurement’ — that sugarcane is being purchased on lower price and shown in the books at a higher price.

The Omni Group benefited

He said that the commission also evaluated in the forensic audit how much subsidy was given to mills for exports. He said "gross injustice" had been committed in Sindh whereby the subsidy "was tailored to benefit Omni Group".

He said this year’s subsidy from Sindh worth Rs9.3bn was given “to all mills” versus a first come, first-served basis. He said this way the company with the biggest share in Sindh, Omni Group, benefitted.