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PSMA, JDW group responsible for manipulating sugar price hike: CCP report

  • The report was made public after 10-month inquiry and investigation into the sugar scandal, highlighting the PSMA and JDW's involvement in illegal activities
Updated 23 Oct 2020

(Karachi) The Pakistan Sugar Mills Association (PSMA) along with JDW group, owned by Jahangir Tareen, manipulated sugar price hike, a report issued by Competition Commission of Pakistan (CCP) transpired.

As per details, the report was made public after 10-month inquiry and investigation into the sugar scandal, highlighting the PSMA and JDW's involvement in illegal activities.

Findings of the report

The report stated that the sugar mill owners influenced the PTI government to export 1.1 million tons of sugar that led to an increase of 48 percent in its price.

The CCP mentioned that sugar mills generated an additional Rs40 billion in revenue on account of the rise in domestic prices due to exports alone during the period February 2019 to September 2019.

It revealed that a one rupee increase in the price of sugar per kilogramme results in a gain of nearly Rs450 million in a month to sugar mills based on an average monthly consumption of 0.45 million metric tonnes (MMT) of sugar.

The report also points out that an amount of Rs29.22 billion was also paid as subsidy to sugar mill owners on the basis of the "artificial crisis" of the industry portrayed by the PSMA — however, the financial statements of various companies suggest that the millers were actually making extraordinary profits.

Published accounts of a sample of 16 sugar mills, from 2017 to 2019, reveal that all sugar mills were making a profit from their operations. The average gross profit margins were 11 percent, 8 percent and 13 percent in 2017, 2018 and 2019 respectively, read the report.

The Competition Commission further observed that the seemingly collusive actions of sugar millers and the resultant hike in sugar price in domestic markets raises the question whether sugar supply had even been in surplus when exports were allowed.

JDW key cartel

The report disclosed that a series of documents recovered from the premises of the JDW Group in a raid on September 25 indicating that committees were formed by sugar mill owners for periodically coordinating stocks and sales positions.

The inquiry committee on examination of impounded data and record noted that Muhammad Rafique, Group Director Finance of the JDW Group, was nominated by PSMA as the focal person for coordinating sugar stock positions, with email records showing that he has been actively involved with sharing and receiving information in this regard.

"This compilation, consolidation and distribution of sensitive commercial information (i.e. mill-wise, region-wise sugar stock positions, sales, ex-mill prices etc.) on the platform of the association constituted a prima facie violation," the report states.

As per the findings of the inquiry report, there is also a huge disparity in the cost structure of efficient and inefficient sugar mills. However, due to the existence of a cartel, inefficient mills are protected and the cost benefits of the efficient mills are not being passed to end users, the report states.

Tareen escapes investigation

Since inquiry into the sugar scam started, Senior PTI leader and JDW group owner Jahangir Khan Tareen flew to London. However, he described his trip to the UK was only for his medical check-up.

There are some widespread speculations that Tareen left for the country to save his skin before the start of government’s punitive action on the findings of the report of Sugar Inquiry Commission that implicated PTI leader and other leading political figures and businessmen in sugar scam.