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Business Recorder
an hour ago
- Business
- Business Recorder
Rs300bn ‘windfall': NA panel seeks sugar mill directors' names
ISLAMABAD: A National Assembly panel headed by PTI stalwart Atif Khan on Monday sought the names of sugar mill directors holding at least 20 percent shares from the Securities and Exchange Commission of Pakistan (SECP), amid reports of Rs 300 billion windfall profits made through price manipulation in connivance with dealers. Officials from the Federal Board of Revenue (FBR) informed the panel that at least 14 FBR officials, allegedly involved in the illegal release of sugar, have been suspended and are currently under investigation. The Additional Secretary of the Ministry of Industries and Production told the committee that millers and dealers manipulated prices following the expiry of the sugar export deadline, earning approximately $440 million from these exports. NA panel to probe Rs300bn sugar windfall He briefed the panel that in the 2024-25 crop year, sugarcane cultivation increased by 1.11% compared to 2023-24. However, due to climate change factors such as heat wave and crop disease, sugarcane yield and sucrose recovery declined. Consequently, sugar production fell to 5.862 million metric tons (MMT), around 1 MMT less than the previous year. Adding carryover stocks of 0.5 MMT, total sugar availability for 2024-25 was estimated at 6.362 MMT, roughly equal to domestic consumption in 2023-24. 'This tight balance between supply and demand led to price increases by the industry from January 2024 onward, following the exports,' he added. The committee, led by the Deputy Prime Minister, held several meetings with key stakeholders including the Pakistan Sugar Mills Association (PSMA), emphasizing price stability. They agreed to cap the ex-mill price at Rs 159/kg and the retail price at Rs 164/kg for one month, until April 19, 2025. 'In May 2025, the committee extended the status quo until June 15, 2025. However, PSMA did not comply and continued to raise prices,' he added. The Ministry of Industries summoned sugar millers, warning them that their actions were unacceptable, but the mills disregarded the ministry's warnings. A track-and-trace system was installed on sugar stocks in November 2021, whereby every sugar sack is stamped with a scanable mark revealing its details, according to FBR officials. However, some sugar bags were released without stamps, allegedly involving officials deputed at the mills. So far, the FBR has seized several trucks carrying unstamped sacks. Sales tax on sugar is deducted at 18% GST rate, amounting to Rs 1,485 per 50 kg sugar bag. Fourteen FBR officials have been suspended, and the Prime Minister has formed a special team including intelligence officials to monitor FBR operations. Sales tax collection from sugar has increased to Rs 100 billion from Rs 65 billion last year, despite a reduction of 1 MMT in sugar production. 'We might not even need to import sugar. The current stock is sufficient until November 15, 2025,' said the Additional Secretary of the Ministry of Industries and Production. It is estimated that only 200,000 tons of sugar may be imported, if any. Notably, 70% of sugar consumption is by industries, not the common man. Officials from the Ministry of National Food Security and Research stated that sugar imports are planned to prevent price hikes and avoid artificial shortages amid concerns about price could rise further in November 2025. After detailed discussions, the panel decided to summon SECP officials to obtain a list of sugar mill directors holding at least 20% shares, which will be shared with the media to reveal any political affiliations. The committee also resolved to review the Public Accounts Committee minutes where the Auditor General of Pakistan claimed sugar millers earned Rs 300 billion in profits within three weeks. Copyright Business Recorder, 2025
Business Recorder
a day ago
- Business
- Business Recorder
NA panel to probe Rs300bn sugar windfall
ISLAMABAD: With sugar prices hovering around Rs 200 per kilogram, a special National Assembly panel is poised to examine how policy gaps, export incentives, and industry manoeuvres have enabled mill owners to reap windfall profits estimated at Rs 300 billion—and whether a new tax can claw some of it back for consumer relief. The multi-party panel, led by PTI's Atif Khan, is scheduled to meet Monday (today) to probe what it calls the 'hidden beneficiaries' behind the sugar price spiral. The inquiry will look into years of cyclical price hikes, export-import swings, and the role of government deregulation. The push for accountability follows testimony from the Auditor General of Pakistan at a Public Accounts Committee meeting, confirming that sugar mill owners had benefitted massively from price fluctuations and export-friendly policies. Critics in parliament have gone further, branding the sugar industry a 'mafia' with disproportionate influence over policy. Tax on windfall profits of sugar millers being mulled Federal Minister for National Food Security and Research, Rana Tanveer Hussain, recently announced full deregulation of the sector — removing government control over prices, procurement, and supply. But while he vowed to act against hoarders and named certain mill owners on the Exit Control List (ECL), retail prices have continued to soar beyond agreed limits. A July 15, 2025 agreement between the government and Pakistan Sugar Mills Association (PSMA) fixed the maximum ex-mill price at Rs 165/kg, allowing a monthly increase of Rs 2 until mid-October. Insiders say the Rs 2 increase was based on a 25% interest rate that has since dropped to 11%, making the agreed carrying cost — and thus the price escalation — unjustified. Ministries of Finance and Commerce reportedly resisted sugar exports over price concerns, but some mill groups withheld stock until export approvals to capitalise on higher global prices — reportedly Rs 30-40/kg more than domestic rates — while avoiding sales tax on exports. The government is now preparing to import 100,000 tons of sugar via the Trading Corporation of Pakistan by October to ease shortages. This follows a broken assurance from PSMA that prices would not exceed Rs 140/kg. Atif Khan's panel is now weighing a windfall tax similar to that imposed on banks, aiming to capture part of the extraordinary profits made by millers and channel them towards subsidising sugar for consumers. The move could mark the first serious fiscal pushback against a sector long accused of manipulating both the market and policy to its advantage. Copyright Business Recorder, 2025
Express Tribune
2 days ago
- Business
- Express Tribune
How sugar cycles fuel inflation
Listen to article Prices of sugar in nearly all parts of Pakistan are once again on an upward spiral, creating fresh concerns for consumers already struggling with inflation. Currently, the retail price of sugar is hovering around Rs190 per kilogramme in several urban markets, with traders warning that rates could climb further, reaching Rs200, if supply remains tight. While the government often blames stockists and middlemen for artificially inflating prices, industry stakeholders and consumers say the cartel is more complex, involving sugar millers, wholesalers, policy decisions, government machinery and even international trade. Historically, sugar prices in Pakistan tend to rise whenever the government allows export of the commodity. This year is no exception. The Pakistan Sugar Mills Association (PSMA) had been pressing the government for months to permit export, citing surplus production. When the permission was finally granted, prices in the domestic market began to climb almost immediately. Wholesalers claim that after exports are allowed, millers and large stockists reduce supplies to the local market, creating an artificial shortage. "We are not hoarding; we simply cannot get enough from the mills at a reasonable rate," said Nadeem Ahmed, a wholesale dealer in Lahore. "If I buy sugar at higher rates, how can I sell it at the government's fixed price? It's impossible." The government's usual response to such price spikes is to enforce strict price controls, ordering retailers to sell at official rates. Shopkeepers, however, argue that this policy is impractical in times of shortage. "They want us to sell at Rs172, but we are buying at Rs180 or even more," said Muhammad Rafiq, a grocery store owner. "If we follow their orders, we will have to sell at a loss. That is not sustainable." At the same time, the sugar industry points to rising input costs as a key factor for the current price hike. This year, the price of sugarcane has surged to over Rs700 per maund, driven by increased cultivation costs and farmer demands for better returns. A senior executive at a major sugar mill in Punjab, who requested anonymity, said that they have paid record prices to farmers for sugarcane this season. That automatically pushes up the production cost, and add the cost of energy, labour and transportation, the retail price cannot remain where it was last year. Sugarcane cultivation and processing form a major part of Pakistan's agro-economy. The sugar sector is the second largest agro-based industry after textile, generating business worth around Rs1,000 billion during the crushing season. As per the millers, it contributes Rs225 billion annually in taxes to federal, provincial and local governments, while saving the country about $4 billion through import substitution. Yet despite its economic significance, the sector has been repeatedly accused of manipulating supplies and prices. Critics also point to the cyclical pattern of sugar exports and imports as a sign that the system benefits certain players at the expense of the public. In years of surplus, the government allows exports, but when local prices soar, imports are arranged to bring the rates down. This back-and-forth often benefits millers and stockists, who can profit from both situations. "Whether it is export or import, the millers never lose," said Raheem Khan, a citizen frustrated by the current high prices. "The only ones that suffer are ordinary citizens. We are paying the price for policies that seem designed to protect the big players." Industry representatives, however, argue that a fair solution lies in a targeted subsidy mechanism. PSMA has proposed a two-tier system in which separate prices are set for industrial, commercial and domestic consumers. Since around 80% of Pakistan's sugar is consumed by industries and commercial users such as bakeries, beverage companies and confectioners, the idea is to let market forces determine the price while ensuring that the remaining 20%, consumed by households, is made available to low-income families at a subsidised rate. If the government can identify deserving households through programmes like the Benazir Income Support Programme, "we can ensure that they get sugar at affordable rates without distorting the entire market," said the sugar mill executive. An official of the Ministry of National Food Security said that the sugar market is on its way towards deregulation, which means that government price controls may soon have less influence. Once deregulation takes full effect, sugar prices will largely be determined by market supply and demand, leaving the poorest households more vulnerable unless targeted subsidies are in place, he said. The official added that currently, it looks like a blame game where wholesalers insist they are scapegoats, millers cite rising input costs and the government blames stockists. However, from the perspective of an average Pakistani, the outcome is always the same: higher prices at the checkout counter. "Without structural reforms in pricing, supply management and trade policy, sugar will remain a sweet deal for a few and a bitter burden for millions."
Business Recorder
6 days ago
- Business
- Business Recorder
Sweet profits, sour costs
EDITORIAL: You don't need to be a forensic economist to see through the sugar sector's game. Prices don't climb this high without a plan. And this one's been refined over decades — export surplus sugar, engineer a local shortage, drive up prices, and cash in all over again. That's not free-market economics. That's policy-enabled profiteering. The state, once again, finds itself chasing shadows of accountability after the damage is done. Now, as sugar touches Rs 200 per kilo, a parliamentary committee is finally considering what should've been obvious years ago: a tax on windfall profits of sugar millers. Just like the banking sector, where unexpected interest rate-driven gains were rightly taxed, the sugar industry too must be held to account. Because this isn't just a matter of market fluctuations; it's a carefully timed cycle that rewards the few while punishing the many. The sugar sector has always enjoyed a unique kind of immunity. Every time prices spiral, every time there's a crisis, the same groups are involved — and they're never far from political power. That's why the old quip goes: sugar is always in government, no matter who wins the election. And with the Pakistan Sugar Mills Association (PSMA) acting as a shadow ministry, it's hardly a secret that policy has long been shaped to protect producers, not consumers. Just look at the facts. The government had an agreement in place: a fixed ex-mill price with a modest monthly increment. But several mills refused to honour it. At the same time, insiders inflated carry costs based on outdated interest rates, exaggerated holding burdens, and lobbied aggressively for exports. With global prices running Rs30–40/kg higher and no sales tax on exports, the incentive to sell abroad was too strong to resist; even if it meant throwing the local market under the bus. That export window, predictably, triggered domestic scarcity. Now the government is floating import tenders at inflated rates, while millers walk away with their margins intact. It's a textbook case of regulatory failure — or worse, regulatory capture. This is why the windfall tax must go ahead. Not as a populist gesture, but as a structural correction. It must serve as a warning to all rent-seeking industries that exploit weak oversight and political connections. Taxing supernormal profits won't solve everything, but it's a start. It creates space for accountability, and helps plug some of the fiscal leakage caused by elite capture. The sugar lobby has long argued that the industry supports agriculture, generates employment, and contributes to GDP. All true. But that doesn't grant it the right to sabotage the market. If anything, the public cost of its manipulations, in inflation, lost productivity, and consumer distress, far outweigh the private benefits it generates. The proposed inquiry into beneficiaries of the latest price spike, and the consideration of a multi-party probe into export dynamics, must be welcomed — and more importantly, protected from political interference. The trend of overstated surplus, underreported stock, and manipulated price floors cannot continue unchecked. Pakistan doesn't need a war on sugar. It needs fair play. If the sector is to remain viable, it must compete, not collude. If millers want access to subsidies, export permissions, and policy support, they must accept regulatory scrutiny, market transparency, and tax fairness. There's still time to correct course. The state is required to assert itself, not just as a responder to crisis, but as a steward of equitable growth. Let the sweet profits flow, but not at the cost of souring the social contract. Copyright Business Recorder, 2025
Business Recorder
04-08-2025
- Business
- Business Recorder
Sugar cartelisation case hearing rescheduled on mills' request
The Competition Commission of Pakistan (CCP) has rescheduled the rehearing of the cartelisation case against the Pakistan Sugar Mills Association (PSMA) and its member mills, following requests from their legal counsels. The hearings, initially fixed for August 4-7, will now take place from September 22-25, 2025. Over 70 sugar mills requested postponement of hearing, the CCP said in a press release. The adjournment was sought on grounds that over 50 mills have filed appeals against the Competition Appellate Tribunal (CAT) order in the Supreme Court, while others cited unavailability of legal representatives due to the Supreme Court's summer recess. While the CCP had scheduled day-to-day hearings in line with the directions of the CAT, it has allowed a one-time postponement in the interest of fairness and to ensure due opportunity for all parties to present their case. The commission will not entertain further delays, and in case of non-appearance or repeated adjournment requests, ex-parte proceedings may be initiated. Notices issued to sugar mills for rehearing in cartelisation case The proceedings pertain to show cause notices issued in November 2020 to PSMA and its member mills for alleged cartelisation and anti-competitive conduct. Hearing notices were most recently issued on July 9 in compliance with CAT's May 21 order, which directed the commission to rehear the matter before a member or chairperson not part of the original bench. Rs44bn penalty on sugar mills: CAT remands case to CCP for rehearing It may be recalled that in 2021, the CCP had imposed a penalty of Rs44 billion on PSMA and its member mills for cartelisation. The order was later set aside by the tribunal, which held that the casting vote exercised by the then chairperson in a 2-2 deadlock was not permissible under the Competition Act, 2010 in quasi-judicial proceedings. CCP 'unearths' sugar cartel CCP 'unearthed' a cartel in the sugar industry through an extensive enquiry in October 2020, which concluded that the Pakistan Sugar Mills Association (PSMA) has been acting as a front runner for cartelisation in the sugar industry since 2010. The CCP's enquiry report concluded, while determining the causes behind the sugar shortage/crisis and price hike, that the sugar mills were using the PSMA platform to take a collective decision to use exports as a means of sustaining or controlling prices or 'keeping it stable'. The enquiry has concluded that the hike in sugar prices appears to be the direct result of misreporting in sugar stock positions (of which PSMA was aware of) that led to a decision to delay sugar imports. The enquiry report observed that the decision not to import in a timely manner caused a rise in sugar prices between, July to September 2020 by Rs11.6 per kg. Report accuses sugar millers of acting like cartel The CCP has the evidence that indicates that in 2019 only, the domestic price of sugar hiked by Rs18/kg due to the commodity's export, while the sugar barons made an additional gain of Rs40 billion in revenue in addition to payment of Rs29.22 billion as subsidy to them. The enquiry report said that evidence gathered during raids on the premises of the PSMA and the JDW Sugar Mills seems to suggest these anti-competitive activities have continued since 2010.
