Inquiry commission on sugar traces 50,000 unregistered buyers

ISLAMABAD: The Inquiry Commission on Sugar (ICoS) has traced around 50,000 unregistered buyers who have been involved in transactions worth hundreds of billions of rupees, a move that may lead the investigators to trace the actual culprits who, by increasing the price of sugar by Rs23 to Rs27 per kg, extracted over Rs120 billion as extra profit direct from pockets of consumers in past sixteen months.

This development came days after the teams of ICoS traced hundreds of 'suspicious benami transactions' worth Rs362 billion which were linked to out of books sale of over 6 MMT of sugar by the mills owners during past five years.

"We have detected 50, 000 unregistered buyers. Out of those, around 40,000 have not filed their tax returns. We suspect that the millers evaded taxes worth billions of rupees through such practice," revealed a senior official who is a part of nine teams conducting forensic audit (on behalf of the ICOS) of six sugar producing companies. 

"We are evaluating some exclusive data received from servers of nine sugar mills which have allegedly been involved in purchasing out of the books cane from farmers through hundreds of brokers and middle men, and subsequently manipulating supply to the market to maximise profiteering," added the official seeking anonymity.

More details emerge about the un-registered buyers

Exclusive details obtained by Geo News from sources associated with ICoS revealed that Hamza Sugar Mills Ltd. sold sugar to 31,000 unregistered buyers. Out of those 31,000 buyers, a staggering number of 28,000 had never filed their returns with tax authorities. The unit which is owned by late Haji Nisar also got subsidy worth nearly Rs213 million from the federal and provincial governments during 2017.

JWD group mills owned by Jahangir Khan Tareen sold sugar to 4,000 non-registered buyers where 86 buyers were not filing their returns with FBR, official documents revealed. Tareen's mills received Rs2.3 billion collectively from the federal and provincial governments during 2017 and 2019 as freight support on sugar exports.

Al-Moiz Sugar Mills sold sugar to 1,700 unregistered buyers where 75 were not registered as tax payers. Shamim Khan — a cousin of Jahangir Tareen — and his son Nauman Khan, also got Rs1 billion as subsidy from the Centre as well as from the government of Punjab in 2017 and 2019 combined.

Exclusive details also revealed that Al-Arabia Sugar Mills owned by Opposition leader in Punjab Assembly Hamza Shahbaz and his brother Salman Shahbaz sold sugar to 1,289 non registered buyers out of which 1,200 buyers had never filed their tax returns.

Alliance Sugar Mills, Ghotki, owned by Federal Minister Khusro Bakhtiar's family, sold sugar to 900 unregistered buyers where 75 were not registered with tax authorities.

Hunza I and Hunza 2 Sugar Mills Ltd sold sugar around 1100 unregistered buyers where 117 were non filers. The units got nearly Rs1.6 billion from the federal and Punjab governments in 2017 and more than Rs429 million from Punjab in 2019. Chaudhry Idrees, Chaudhry Muhammad Saeed and Chaudhry Waheed owned those units.

The inquiry commission also identified 3,000 brokers and middle men who controlled monopoly over the domestic sugar market and helped millers to earned extra profit which was directly extracted from consumer pockets. 

"We've got details of 295 brokers from State Bank of Pakistan. Brokers are also focus of our investigations. Majority of them are from Babar Center and Akbari Mandi Lahore and Jurian Bazar Karachi who control complete monopoly over domestic sugar prices," a senior official involved in the exercise of compiling that data told Geo News. 

Millers did not pay much direct tax (income tax) during past five years and some even showed business losses and claimed refunds worth Rs7.8 billion, he said, adding that the Commission was contemplating to take more time to investigate tax evasion matter of millers who collectively sold 6.4 MMT sugar out of books and those brokers who in connivance with some of the industrialists evaded taxes, sales taxes in particular.

Investigators claimed that millers and brokers have doggedly sold out of books (Tax evaded sales) sugar worth Rs33 billion during past five years. The breakup included: Some Rs4.9 billion against 1.12 MMT sugar during 2015-16, Rs6.1 billion against 1.55 MMT sugar during 2016-17, Rs5.9 billion against 1.45 MMT sugar during 2017-18, Rs5 billion against 1.15 MMT sugar during 2018-19 and Rs11 billion against 1.1 MMT sugar during 2019-2020.

These sugar mills collectively sold sugar worth Rs905 billion in domestic and international markets by receiving subsidy worth Rs24.9 billion from provincial as well as from federal government during past three years. Millers sold sugar worth Rs709 billion in domestic market while Rs196 billion were earned through export of sugar. During past four years these mills held 38% of total sugar market in the country and received Rs262 billion in 2017-18, Rs335 billion and Rs172 billion by selling sugar in domestic market during 2019-20. Rest of 62% industry is not facing any inquiry or forensic audit, questioned owners of nine mills, now facing commission's wrath.

Interviews with some officials associated with the commission revealed to Geo News that probing teams got details of around three dozen suspicious accounts opened in the names of employees of different sugar mills where transactions of over Rs500 billion were made during past five years. Those were 'benami' transactions and the officials claim that thousands of suspicious transactions could further come to light during the coming days. Apparently such transactions fetched sizeable cash tranches to the mills owners who entered into un-written agreements with potential buyers for more profit as well as to evade taxes.

Originally published in The News