CCP takes action against 84 sugar mills for price manipulation

ISLAMABAD: Shortly after sugar baron Jahangir Khan Tareen arrived in Pakistan, the Competition Commission of Pakistan (CCP) issued show-cause notices to the Pakistan Sugar Mills Association (PSMA) and 84 member mills over alleged cartelisation in sugar pricing in a bid to control the rising sugar prices in the country.

The show cause notices were issued after the CCP decided to initiate proceedings under Section 30 of the Competition Act on the recommendations of an inquiry into the anti-competitive activities in the sugar sector.

Previously, Tareen had tweeted that he would help the government control the sugar prices but it has emerged that Tareen and PM Khan are still not on the best of terms.

After the show cause the PSMA and 84 mills will individually respond to the allegations of the CCP team. The hearings will commence after two weeks’ time.

The CCP’s inquiry has found multiple instances where the PSMA is acting as a front-runner for cartelisation in the sugar industry.

The inquiry report noted that the PSMA has maintained cartels among its members not only to protect inefficient mills but also keep the commodity’s prices high.

The CCP report highlighted that the PSMA was maintaining an illegal balance between efficient sugar mills which have the production cost of around Rs43 per kilogram and those producing sugar at Rs78 per kg. The report said that the approach to maintain a balance was benefiting both the efficient mills and the inefficient ones which continue to remain in business on the basis of government subsidies and higher rates.

On its part, the PSMA rejected the CCP inquiry report.

Meanwhile, the CCP has said that the notices have been issued after evidences gathered during search and inspections conducted on the premises of PSMA and JDW Sugar Mills by the CCP teams, that suggested anti-competitive activities have continued since 2010.

The impounded data included exchange of emails between a senior official of one of the member mills and PSMA Punjab zone office bearers. The data included sensitive commercial information such as mill-wise, district-wise sugar stock position, and even the quantity of cane crushed, sugar produced, recovery percentage, carry forward old/raw sugar, total sugar, quantity sold, balance and sold percentage.

Prior to issuing the show cause notices, the CCP had conducted an analysis of the WhatsApp messages exchanged in a group of PSMA officials, the same senior official of the member mill was found to be in constant communication with regards to price and stock related data of sugar mills.

The impounded data indicated the senior official’s continued involvement in sharing/receiving sensitive information regarding sugar industry since 2012 when he was nominated as the focal person for coordinating the sugar stock position by PSMA.

The initial inquiry revealed that the PSMA’s platform was also being used by member sugar mills to collectively make commercially sensitive decisions such as reduction in domestic stocks/supplies of sugar, which led to an increase in or maintenance of desired price levels in the relevant market.

PSMA and all 84 sugar mills prima facie violated the Competition Act by collectively deciding to export sugar and thereby fixing the quantities of sugar to be supplied in Pakistan, the CCP maintains that sugar industry also violated the Act by reducing stocks of sugar through exports; hence collectively raised and maintained prices of sugar in Pakistan.

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