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The Competition Commission of Pakistan's (CCP) initial probe into the sugar sector has not yet seen any sign of collusive activities within the industry, CCP Chairperson Vadiyya Khalil informed the federal cabinet in her presentation.

The CCP chairperson briefed the cabinet on the cost audit of sugar recently done by CCP. The cost audit was authorized on 25 June 2019 and was concluded on 21 October 2019. Financial and costing of 65 sugar mills (Punjab=39, Sindh=22, KPK=4) were reviewed for the crushing season 2016-17. Based on the findings of the cost audit, the average cost of production of sugar is Rs 51.93 per kg.

She informed the cabinet that reasons for increase in sugar prices included increase in sales tax from 8% to 17%, increase in transportation and packing cost, Rs 3 profit margin of sugar mills and Rs 3 per kg profit margin of dealers, and increase in fuel cost based on rupee dollar parity. Moreover, with the factor in the dealers' and mills' profit margins, the price of sugar comes to Rs 72 per kg "If we take on the latest cost of inputs for the crushing season 2018-2019, the price of sugar will be much higher," she said.

"Based on the abovementioned figures as well as other information available with the inquiry team, so far we have not been able to ascertain any signs of collusive behavior in the sugar industry," Khalil informed the cabinet.

The CCP was invited to give a presentation in the cabinet meeting and discuss its role in promoting competition and controlling the unreasonable increase in the prices of essential commodities.

Khalil in her presentations explained the role of CCP, its mandate in tackling cartelization, and the CCP's recommendations regarding the formula in determining the prices of essential food commodities.

The chairperson informed the cabinet that its cases were pending in the courts and therefore, the recovery of almost Rs 27 billion of penalties that it has imposed on cartels and other violators of Competition Law over the past 10 years could not be made. The federal cabinet threw its weight behind the anti-trust watchdog in resolving its pending issues.

Prime Minister Imran Khan expressed his reservations over the non-recovery of CCP's penalties on cartels and dominant undertakings in sugar, cement, LPG, banking, poultry, automotive, ports and shipping, oil and gas, healthcare, telecom, and fertilizer sectors.

Sources told Business Recorder that PM Khan personally directed all the concerned to strengthen the CCP by taking appropriate steps and work with the regulator in enforcing its writ.

Khalil also informed the cabinet that on 29 August 2019, CCP issued a policy note to all provincial governments to review the policy frameworks and recommend amendment in laws to improve state of competition in economic sectors. "Laws relating to food stuffs, essential commodities, agriculture produce markets and godowns registration should be upgraded and consolidated into one state-of-the-art law," she said.

Copyright Business Recorder, 2019

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