Sugar cartel

The Pakistan Sugar Mills Association (PSMA) has implicitly conceded a number of charges levelled against it by the Competition Commission of Pakistan (CCP). The CCP had issued a show-cause notice to the PSMA for a prima facie case of cartelisation after the completion of an enquiry report. The CCP would issue a show-cause notice to other sugar mills after the initial hearing of the PSMA case.

The sugar crisis has badly affected everyone in Pakistan in recent times. Last month, the Supreme Court ordered the government to devise a mechanism to ensure availability of sugar at Rs 40 per kg to domestic consumers. Whether one accepts or rejects the notion of the courts’ involvement in the administrative or economic issues of the country, the fact remains that the apex court’s decision makes it incumbent on the federal and provincial governments to follow these orders.

The government now also has to ensure a steady and uninterrupted supply of sugar all over the country. The sugar mill owners have banded together as a cartel to withhold supplies and have increased the price artificially by hoarding sugar. This amounts to contempt of court.

The government has to come up with a strategy to tackle the sugar crisis. In past years, the food ration system was instituted to provide staple foods at controlled prices but it was eventually abandoned because of widespread abuse. However, the policy framework to allow free market forces to determine the price of essential items has also failed. Adam Smith’s laissez faire philosophy cannot be applied because neither markets nor competition is fair, certainly in Pakistan, arguably globally. The market has only exploited the consumer, especially when it comes to essential items like sugar. There are many lacunae in the sugar policy. It does not benefit the growers of sugarcane because the owners have devised a strategy to let the sucrose content of the sugarcane decrease before they buy it by delaying the growers at the factory gate. Nothing has been done about the exploitation of the growers and the consumers because there is a powerful mafia behind it all. The bulk of the sugar mill owners are in politics and sitting in parliament, and therefore able to block any move against their monopolist manipulation of the sugar market (NAB’s abortive foray into this field should be kept in mind).

One cannot imagine the woes of ordinary citizens who are faced with inflation, unemployment, high utility bills and now exorbitant rates of essential items like sugar. Almost one-third of Pakistan’s population lives below the poverty line. The poor man works endlessly for two meals a day, and when food prices rise steeply, it is impossible for the poor to get even two square meals a day. Such has been the misery of the poor man in Pakistan. The prices of atta, sugar, and ghee have gone through the roof, apart from many other staple food items. Surely, the government cannot remain aloof from the miseries heaped on the people by the rising prices of food commodities. The government has to take positive and concrete steps to alleviate poverty and look into this serious problem in a broader perspective. It should keep in mind that poverty breeds crime and general social unrest.

Perhaps the only solution is to nationalise the sugar industry. Those who say that it would be a mistake should not confuse the proposal with the 70s nationalisation. It failed mainly because it was handed over to the bureaucracy. The government should seriously consider nationalising the sugar industry and handle it in a better way this time through corporatisation of the sector, with professional management. By doing nothing about the sugar crisis, the government will end up being equally blamed along with the sugar cartel in holding the country and the people to ransom.

source: dailytimes