CCP warns of policy action in face of sugar crisis

The emerging sugar crisis has landed in the Competition Commission of Pakistan (CCP), which stated on Tuesday that it was closely monitoring the ongoing situation and strict enforcement and policy actions would be taken if any anti-competitive activities were found.

Sugar prices have touched Rs175 per kg in Ramazan and are expected to rise further to Rs200 owing to the alleged cartel of sugar millers.

The government had allowed sugar export to the millers, but it did not consider wider implications of the policy. Now, to arrest rising prices and meet consumer needs, the government is planning to import raw sugar for supply to the market.

Earlier, the millers made significant money following exports of the sweetener and now dealers are expected to get a windfall with the import of raw sugar, putting both consumers and the government at a disadvantage.

The CCP said that it had been actively working to curb cartelisation in the sugar industry by promoting fair competition and protecting the consumers.

In 2020, the commission had launched an inquiry that revealed that sugar mills were engaged in price fixing and controlling supplies through coordinated actions facilitated by the Pakistan Sugar Mills Association (PSMA). As part of the investigation, the CCP also conducted raids at the PSMA offices.

As a result, in August 2021, the CCP imposed huge penalties of Rs44 billion on sugar mills and the PSMA – one of the highest fines in its history. However, the decision was challenged in courts, leading to the issuance of stay orders by the Sindh and Lahore High Courts as well as the Competition Appellate Tribunal. It delayed the recovery of penalties.

The CCP has consistently intervened to enhance transparency and competitiveness in the sugar sector. Its first inquiry in 2009 found evidence of PSMA’s involvement in price fixing and manipulation of production and supply quotas. Consequently, the CCP served show-cause notices on certain sugar mills and the PSMA on July 16, 2010, though the proceedings were subsequently stayed by the Sindh High Court.

Over the years, according to the CCP, it has issued multiple policy notes (2009, 2012 and 2021), recommending the federal and provincial governments to reduce market distortions. Key recommendations included deregulating the sugar sector, allowing market forces to determine prices and lifting restrictions on the establishment or expansion of sugar mills to encourage competition.

In its latest policy note, the CCP advised the government to discontinue the practice of announcing support prices for sugarcane and instead adopt a market-based pricing mechanism. This shift will ensure a fair compensation to farmers while fostering efficiency and competition within the sector.

Currently, 127 cases related to sugar cartelisation are pending in various courts, including 24 in the Supreme Court, 25 in the Lahore High Court, six in the Sindh High Court and 72 in the Competition Appellate Tribunal. To expedite the resolution of these cases, the government has recently appointed a new chairman and members of the appellate tribunal.