Features International Sugar Journal

Rumble in the Pakistani industry as sugar barons investigated

While the Covid-19 pandemic continues to engage and exercise governments, in the global sugar industry, one distraction that has been overshadowed has been Pakistan’s government launching an enquiry against the powerful sugar industry for manipulative practices that saw domestic sugar price rise by 20% over past year causing public outrage. The central allegations stemming from the report1 are that the sugar barons were allegedly involved in the shortage and price hike of the commodity, tax evasion and undue export subsidy for many years.

One of the salient fact about the sugar industry in the Indian sub-continent is that it is heavily politicized. What is notable though is the exposé of alleged malpractices in the sugar industry by the Pakistani government instigated by the former cricketer and the Prime Minister Imran Khan.

Sugar barons and constituencies proliferate in both India and Pakistan. Neither have moral superiority over the extent of the stranglehold they have on their respective industries.

In India, sugar is the most highly regulated of all commodities in the country. The cyclical trend in sugar production with surplus one year followed by a deficit in the other finally prompted an attempt to overhaul the existing sugar policy informed by market and production controls. In 2012, the committee, led by C. Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council, favoured complete decontrol of the sugar industry. But the political masters were reluctant with wresting the production arm largely because of the debt they owe to their fairly influential political constituency – millions of cane growers. During the period 1952-1972 “21 chairmen of sugar co-operatives have held important positions in the Congress party”2. Cane payment system is skewed towards benefitting growers as the government is beholden to them.

In the corridors of power in Pakistan, sugar barons exert significant influence. As the Financial Times piece3 pointed out ““Imran Khan is a product of the political marriage between the military and the sugar barons,” says Husain Haqqani, a former Pakistan ambassador to the US and now a senior fellow at the Hudson Institute, a Washington-based think-tank. “The sugar barons are an integral part of Pakistan’s deep-rooted corruption, along with the military.””

The report confirmed the perception that the sugar cartel not only exists but continues to use manipulative practices to increase prices to maximise profits. It noted that six groups control 51% of the sugar output and have political influence. JDW group – 6 mills, · RYK Group – 5 mills, Al Moiz Group – 5 mills, Tandlianwala Group – 3 mills, Omni Group – 10 mills, Sharif Family – 9 mills, and Others – 51 mills. “These groups have the capacity to manipulate the market by joining hands,” the report stated, adding that most of these sugar mills worked in “collusion” and offered farmers a very low price to buy their produce. In 2020, these companies enjoyed subsidy of billions of rupees that were allocated for the export of sugar. It was apparent, the report concluded, that “the sugar mill owners who availed the maximum subsidy had political clout and influence in decision making and tried to gain maximum benefit.”1

So, while Imran Khan sought and secured the support of the biggest sugar baron in the Jahangir Tareen (JDW Group) who helped tip the July 2018 election in his favour, Khan had little option but to respond to the public outrage to sugar prices skyrocketing as he “cultivated his image as an outsider promising to clean up Pakistan’s endemic graft and end the reign of corrupt elites”3.

Only time will tell what reforms, if at all, will ensue following the exposé. But what is clear is that the Pakistani sugar industry is one of the top ten in the world and will continue to be an important player.

Endnotes

1 Report of the commission of inquiry constituted by Ministry of Interior to probe into the increase in sugar prices (2020) https://e.jang.com.pk/pdf-data/sugar-report.pdf

2 M. Lalvani (2009) Sugar co-operatives in Maharashtra: A political economy perspective, Int Sugar Journal, 111 (1328):496-518

3 Stephanie Findlay and Farhan Bokhari (2020)  Pakistan: Imran Khan tackles sugar barons in push to hold on to power https://www.ft.com/content/0dcae657-3964-4951-8e63-bbaa86e1d893