Who will take on the powerful sugar cartel?


It is time to take stern action against sugar cartel


Cartelisation of economy becomes a norm when government failed to regulate the market and to stop the powerful elite to manipulate the production and supply to increase the prices. The cartels enjoy freedom in Pakistan to manipulate the prices and supply in the market to maximise the profits.  These cartels collude to set prices by supplying the market short. As the price goes up, the businesses make gains of billions of rupees at the expense of consumers. The sugar mills forms the most powerful cartel in Pakistan.
The investigation report on sugar and wheat crisis has once again revealed this fact. There exist cartels that control the economy. The members of a cartel maintain their separate identities and financial independence but pursue common policies, thus exercising monopoly power. 
One of the most respected capitalist economist  Adam Smith once wrote: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
Pakistan has Competition Act, 2010 to safeguard the interests of consumers against cartelisation. This law prohibits cartels. The Section 4 of the  Competition Act,2010 states that undertakings or associations are prohibited from entering into any agreement or making any decision with regard to the production, supply, distribution, acquisition or control of goods or the provision of services, which have the object or effect of preventing, restricting, reducing, or distorting competition within the relevant market.

So the regulatory framework to promote competition is in place but it has not been effective in curbing anti-competitive practices, particularly cartelisation. Since the Competition Act 2010 in place-we have seen two sugar crises. First in 2010-it was   Pakistan’s worst sugar crisis in recent years when all of a sudden sugar became a scarce commodity and at the end of the year its price had shot up to Rs 125 per kilogram.
The Prime Minister Imran Khan made the right decision to made two investigation reports public. But the question remained that how this government will take action against sugar cartel. Sugar is the country’s second largest agro-based industry comprising about 87 sugar mills. This industry is closely linked with the most powerful political families of Pakistan. The leadership of PML-N- PPP-PML-Q owns sugar mills and some prominent leaders of PTI also have sugar mills. There is strong link between the political leadership and sugar industry.
This report precisely exposed this link and connection. The reports on wheat and sugar crisis has revealed that the big names of ruling party and its allies are involved in the manipulation of prices and taking advantage of the crisis.
The Competition Commission of Pakistan (CCP) inquiry and report in 2010 exposed the presence of cartel in sugar industry. 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 Rs 125 to 135 per kilogramme against a production cost of less than Rs 55 per kg.
This was again proved in the inquiry of CCP in 2019. Competition Commission of Pakistan (CCP) in its report in 2019 revealed that sugar and wheat flour millers have formed cartels for dictating their terms in the market.
Sugar and wheat flour millers have sharply increased prices in a bid to extract additional billions of rupees from consumers. Following the price hike, the government sent their cases to the CCP for investigation.
The CCP found that sugar and flour millers had formed cartels and increased product prices to exploit the consumers. But no action was taken by the government. Then the government formed FIA led inquiry committee and this committee headed by FIA DG Wajid Zia found the same.
It has been proved time and time again that cartels do exist. The real issue is to take action to break these cartels.  Now the government of Prime Minister Imran Khan is going for forensic audit before taking action. Why the government is not taking measures and formulating the policy framework to break these cartels to safeguard the interests of consumers. Sugar and floor is the basic commodity and every household used it in daily life. The government should take immediate action against sugar and other cartels.
There is no need of forensic audit. It is further wastage of time and sources. The previous inquiry reports have already ascertain the undeniable facts in this regard. It is time to take action.  
                                                               The Editor

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