Sugar subsidy is a funny thing. Last year, when Sindh government announced a cumulative subsidy of Rs 20 per kg on exports, notorious Omni group came out as top beneficiary in the province. This year, ever since now-enfeebled province masters had to restrain their generosity, Omni group is nowhere to be seen.
In fact, aggregate share of Sindh and KP based mills has been a puny 1.6 percent since ECC announced export quota in December 2018. This is against Sindh’s provincial share of 47 percent in exports last year. That year, KP alone availed two percent of the two million tons export quota announced by the GoP.
It appears that despite substantial depreciation of rupee since last year, sugar exporters are still finding it hard to sustain exports without government intervention. Thus, 16 firms - all belonging to Punjab province - were responsible for more than 98 percent of all sugar exported during the calendar year, after the Punjab government announced per kg subsidy of Rs 5.35.
Little surprise here then that the lion’s share in the exported volume was contributed by JDW Sugar, at one-fifth of total, in line with group’s total share in annual domestic output. However, while the provincial government has announced subsidy only for export by mills located in Punjab, three out of five units owned by the group are located in Sindh.
Since SBP disclosures only identify exporting company name and not location of mill, it raises an interesting question whether the company will claim subsidy against all exports or draw distinction between sugar produced in various locations. Of course, since all sugar produced looks the same, this appears to be less of a legal and more of an ethical dilemma for the company management.
In addition to JDW, one other loosely connected cluster of mills from south Punjab had a cumulative share of more than twenty percent in total exports. The affiliation is established based on the fact that at one point or another during past five years, these four units featured a director and/or significant shareholder belonging to the same sponsor family.
It may be of interest to readers that the provincial ministry responsible for issuance of subsidy notification is headed by a prodigy of the same family; the minister in question was also a shareholding director in at least one of these mills as per returns submitted to SECP.
Conservatively defined, mills owned by politically influential families of Punjab are responsible for fifty percent of total exports this year. And by virtue of being located in the province, beneficiary of at least 53 percent of subsidy accrued based on orders approved, which lapsed at FY19-end.
It will be unfair to claim that the sector has witnessed no change under the fresh political setup at both federal and provincial levels. Not only is the subsidy announced almost half of what was approved under the more generous previous government, the export quota was also nearly half.
The key question, however, is whether the beneficiaries have changed? At least not in Punjab.