The salient points of the sugar inquiry report were revealed in a press conference led by Barrister Shahzad Akber, Special Assistant to the Prime Minister on Accountability which, sadly, indicated a complete lack of understanding of the way trade and industry operates all over the world, including Pakistan, as well as an unfamiliarity with the way things function and have functioned in the sugar industry in this country. Six damning points noted in the inquiry report and highlighted by the Barrister need to be emphasized in this context.
Firstly, the inquiry report states that it rejected the explanation given by the Advisor to the Prime Minister on Commerce Razzak Dawood that once it was realised that sugar exports to China were the reason for rising domestic price of the commodity exports could not be discontinued because of the sanctity of a contract. What is patently evident to even a novice engaged in exports is that once a contract is reneged on, that particular firm and by extension, other traders in that country and in some instances in other countries as well, would hesitate to trade with us. One would have hoped that before raising this issue in a press conference, the Barrister would have reflected on Pakistan's history of reneging on contracts that have cost us millions of dollars in penalties imposed by the international court.
Secondly, forward trading (satta) is not regulated in Pakistan unfortunately. And it is a well known practice amongst the farming community that middlemen (known as aarthis locally) routinely lend to poor farmers to meet their basic input costs and charge an exorbitant interest as the risks involved are extremely high. The locust attack that took the government months before it began to consider it as a potential threat to farm output (though farmers of several areas are complaining that they have yet to receive government assistance) is one such risk while lack of water is another. Poor farmers are in all probability not even aware that they can access loans from dedicated banks at much lower rate of interest; and it would be relevant to note that during previous administrations, loans at zero interest to poor farmers were hijacked by the rich as the target group had low to no education.
Thirdly, exports to Afghanistan, through legally registered trade, have always hurt this country as most of the goods land back in Pakistan and are then sold duty-free. This issue has been raised time and again and so far remains unresolved. Here too the government would need to engage in better policing and one would hope that the administration is aware that passing legislation is quite distinct from actually implementing the law.
Fourthly, the Punjab cabinet was not taken to task in the press conference even though it calculated the freight subsidy on the basis of the existing rupee-dollar parity rather than on the basis of the parity the year before as the sugar was from the previous season. The difference between the rupee-dollar parity between the two years was a whopping 30 rupees per dollar.
Fifthly, the report fails to understand that arbitrage is a standard normal practice in all countries defined as profits through exploiting the price differential of say sugar in different markets. True that arbitrage is an outcome of market inefficiencies; however, the learned and able Barrister should surely have known that in Pakistan market inefficiencies as reflected by the proliferation of cartels abound. For the report to identify lack of performance of the Competition Commission of Pakistan (CCP) in the case of sugar may be relevant to some extent however ignored is the practice of getting stay orders against decisions by the CCP. Ironically, however, the CCP Chairperson was dismissed in October 2018 and was working on a stay order till she was finally dismissed by the Islamabad High Court in the third week of April 2020.
And finally, there is an overwhelming perception that the inquiry report seeks to humiliate one man, Jehangir Khan Tareen, and absolves all other members of the ruling party such as Khusro Bakhtiar and his brother in the Punjab cabinet. To argue that the brothers recused themselves from all decisions pertaining to sugar export and subsidy is hardly a logical defence given that neither Jehangir Tareen nor for that matter Moonis Elahi, the Omni Group or the Sharif family are occupying positions of authority for the last 20 months.
The PTI-led government has been in office for long enough to improve governance and to lay the blame on the beneficiaries rather than on those who allowed the benefits to accrue to some sugar mill owners is tantamount to taking the bull by the tail rather than the horns. True there is a need to deal with the existing market inefficiencies, in several products including sugar, flour and cement, yet the responsibility for that lies with the government.