The KP gur conundrum

Domestic businesses’ traditional sob story is of large- politically vested commercial interests driving out competition from smaller fish in the pond. The perception has particularly taken in the case of sugar industry, which is noted for its political footprint, including in this space.

But it appears that having political representation does not always get you what you want; given the fruits may not be distributed evenly. That at least appears to be the case of cane-based mills in KP, who are being haunted by gur (jaggery) producers in the informal sector.

In a letter to chief minister, chairman PSMA-KP chapter has claimed that the giants of provincial milling scene are at the risk of being put out of business, as over eighty percent of sugarcane cultivated in the province is being directed toward gur-making. Although official statistics – Economic Survey or industry association – for the just ended sugarcane marketing year (ended September 30^th) are not out yet, the letter claims that Peshawar valley mills were able to procure only 408,000 tons of cane out of 3.8million tons produced by the province, with ninety percent of the balance being consumed by gur producers.

According to Iskander M. Khan – sponsor of the largest group of cane-based mills in the province – all this takes place in the name of cottage industry; except, commercial gur producers are anything but. Gur production has become heavily mechanized over the years, graduating from oxen-driven days of the yore. Khan also asserts that commercial gur producers evade sale tax and minimum wage payment and are able to procure raw material cane at a higher rate as a result.

While sale tax evasion in any informal and undocumented sector, including gur, may come as no surprise, some caveats must be added. For one, the formal sugar milling industry has itself been bogged down in the past by accusations of under reporting and under invoicing its sales. Even so, PSMA’s call for level playing field are not wrong in principle, but the past baggage may impact its ability to lobby for its cause.

More pertinently, if the sugarcane utilization by formal players in KP has been as low as is claimed, it sure has refused to show itself in region-wise retail-price surveys by PBS. In fact, average retail price of white sugar in Peshawar as per PBS last week is only marginally higher than national average, at Rs 75 compared to Rs 74 per kilo (and at parity with urban centres such as Lahore). While a counter may be offered that sugar price has remained stable because the deficit is fulfilled by gur availability, except an additional claim routinely made by industry insiders is that commercial gur production has flourished due to the booming smuggling market to Afghanistan. If gur is indeed disappearing from provincial supply, should retail price of sugar not go through the roof?

What is more troubling that there is precious little the government can do to take stock of the situation and placate both parties. No independent measure of sugar production exists on regulatory level, as official census collects information from mills association. This is not to insinuate that PSMA official figures lack credibility, but when perception challenges exist on both sides, any punitive action taken against gur producers alone may appear biased.

The solution, as is often seen, is not to conduct raids of production premises of gur or sugar producers, but for the regulator to make its statistics collection more transparent and independent of manufacturers. But hoping for a change in that direction may be too fantastical, considering that the credibility of governmental crop production estimates is itself a question mark.