Pakistan’s sugar ‘mafia’ snares subsidies worth Rs 45 bn
The country's powerful sugar lobby, dominated by influential political families, cornered big subsidies at the expense of sugarcane growers
Pakistan’s powerful sugar mafia – dominated by political heavyweights – gobbled up subsidies worth Rs.45 billion (US$407 million) during the crushing season in November and December last year, while declining to buy sugarcane from poor growers even at state notified prices.
Instead of buying sugarcane from growers, millers got their crushing schedule delayed till late December by demanding that the government either procure surplus sugar from millers or allow “excess” commodity to be exported.
Cabinet’s Economic Coordination Committee (ECC) ended up bowing to the powerful cartel, allowing the export of 1.5 million tons of sugar in November and granting a subsidy of Rs 10.70 (9.67 cents) per kilogram. This cost over Rs 16 billion ($145.7 million) and was done despite it not having any allocated funding.
And in December, the ECC backed a proposal by the Punjab government to procure about 300,000 tons of sugar for export. This meant the government doled out a further Rs 15 billion (US$135.6 million) to millers.
Intriguingly, the Sindh provincial government sanctioned an additional freight subsidy of Rs 9.30 (8.41 cents) per kilogram in violation of a decision by the Council of Common Interests (CCI). The CCI turned down a proposal for freight support in November. These support measures saw the politically connected sugar ‘mafia’ accumulate a whopping US$407 million in benefits.
Politicians own most of the sugar mills
Wealthy politicians who rule the federal and provincial governments own the majority of sugar mills in Pakistan.
The Pakistan People’s Party (PPP) co-chairperson Asif Ali Zardari is believed to have stakes in as many as 16 sugar manufacturing units in Sindh. Similarly, in Punjab, the Sharif family owns many sugar mills. A former federal minister in General Pervez Musharraf’s cabinet, who later joined the PPP, Abbas Sarfaraz, is the owner of five out of six sugar mills in the Khyber Pakhtunkhwa province. And prominent politicians belonging to the Pakistan Muslim League (Q), Pakistan Tehrik-e-Insaaf (PTI) and Pakistan Muslim League (N) are members of the country’s sugar cartel.
“We did belong to a political family, but it does not mean that we will manipulate power to take undue financial benefits,” the CEO of a big industrial group running a chain of sugar industries in the Khyber Pakhtunkhwa said. He claimed that falling sugar prices in the global market created a huge surplus which could not be sold without state support. He said the default ratio in the province was insignificant when compared to other parts of the country. “However, millers in Sindh got a subsidy of Rs 20 (18 cents) per kilogram and we got Rs 10.70 (9.7 cents), which put us in a disadvantaged position compared to Sindh province,” he said.
The government gave an impression that the subsidy and procurement methodology would help millers to acquire sugarcane from growers at the prescribed rate and ensure timely payments to farmers. But sadly, the procurement of sugarcane was not regular and farmers did not get paid at the notified rate.
“The huge subsidy to the sugar mills did not benefit the poor growers, who are paid Rs 120 (US$1.08) per 40 kg, as against the official rate of Rs 182 (US$1.82),” the president of Pasban-e-Pakistan (PP), Altaf Shakoor told Asia Times. PP is a Karachi-based socio-political group that fights for social justice and democracy.
Delay in crushing schedule benefitted millers
The group recently organized a big farmers’ rally in Sindh to highlight injustices meted out to sugarcane growers. Altaf said that 80% of sugar mills in the province were owned by Asif Ali Zardari and that was why growers who took to the streets failed to get support from the Sindh government.
“The deliberate delay in the crushing schedule served the interests of the millers, as pre-harvest crops lose weight while its sugar content increases giving a double benefit to the sugar mafia,” he explained. This meant desperate growers had no other option but to sell their crop at a throwaway price.
The dried standing sugarcane in the Sindh and Punjab could neither be harvested nor disposed of as harvest time – October to November, which caused big financial losses for the growers.
“It is a very awkward situation because the growers cannot sow the summer crop unless the sugarcane is harvested. So they suffered multiple losses,” Murad Ali Nizamani, head of the Sindh Chamber of Agriculture told Asia Times. He said the harvest should have started in October but it was not finished due to the irregular crushing schedule.
“Some millers whose dealing with the growers was businesslike were asked to follow suit,” Nizamani maintained.