Punjab govt blames LHC stay orders for sugar crisis

• Stay orders preventing acquisition of sugar mills' record, CM told.
• Sugar hoarders enjoying free rein due to stay orders, food secretary says.
• CM Naqvi tells Punjab advocate general to appeal cancellation of orders.

LAHORE: As the price of sweetener continued setting new record, the Punjab government has blamed the Lahore High Court stay orders for the crisis, which halted the implementation of the sweetener's notified cost and averted monitoring of its supply chain, The News reported.

In a meeting of the provincial cabinet — chaired by Caretaker Chief Minister Punjab Mohsin Naqvi on Tuesday — regarding sugar prices, the Punjab food secretary mentioned that the court's stay orders have prevented the acquisition of the records of sugar mills.

The Punjab government has, in response, decided to take prompt action and file an appeal for cancellation of the stay orders. The advocate general of Punjab has been directed by the chief minister to urgently initiate the appeal so that there is stability in the price of sugar.

Sugar hoarders, according to the discussion during the meeting, have been enjoying free rein due to the stay orders, which has led to a considerable rise in the prices of the commodity, making it inaccessible for the common man.

According to an official brief dated September 5, 2023, the stay order — issued on May 4, 2023, and August 15, 2023 — paved the way for the price escalation of sugar. The dates of stay orders were extended on one ground or another. The August 15 stay order prevented the provincial government from monitoring the sugar supply chain, which, according to the government, led to its smuggling to Afghanistan.

In the meanwhile, the sugar mills and speculators were charging Rs180 per kilogram against a very fair and notified retail price of around Rs100/kg. Since May 4, 2023 till date, around 1.4 million metric tons of sugar have been sold by the sugar mills at an average of an additional Rs40per kg.

The sugar mills and the brokers/dealers/speculators have thus extorted Rs55 to Rs56 billion extra amount solely because of the stay orders, the brief states. The stay order against monitoring of the supply chain of sugar prevented the provincial authorities from checking the movement of sugar and its smuggling to Afghanistan, the Punjab government claimed.

It is recalled in the official brief that during this crushing season, a total of 7.730 million metric tons of sugar, including carry-over stocks were produced out of which 5. 32 million metric tonne stocks were in Punjab. The Punjab stocks were sufficient to cater to the needs of the ‘integrated region’ comprising the Punjab. Islamabad Capital Territory (ICT), partially Khyber Pakhtunkhwa, Azad Jammu and Kashmir and Gilgit Baltistan. Historically, Punjab caters to this region in this connection.

On April 20, 2023, the Federal Ministry of National Food Security and Research (MNFS&R) notified an ex-mill price of Rs96.08/kg and a retail price of Rs99.33/kg for Punjab. However, this notification was suspended by the court on May 4, 2023 on the contention that the subject of price fixation was provincial, the government maintained. The next date of hearing has been fixed for September 20, 2023.

Taking a leeway from the judgment, the food department moved a summary for the provincial cabinet and powers of fixation of sugar were delegated to the Cane Commissioner Punjab by the Cabinet through the Punjab Foodstuffs (Sugar) Order, 2023.

Subsequently, the Cane Commissioner started the process of determining of ex-mill sugar price. However, the LHC issued a stay order against price fixation on August 1, 2023. The case was fixed for today (Tuesday, September 5). However, the cane commissioner, who was present during the hearing, telephonically informed that the stay order had not been vacated and the case was referred to a division bench.

According to Punjab’s assessment in a fact-finding report, around 0.7 million tonnes of sugar have been smuggled through western borders. Owing to various factors, the flow of this sugar could not be stopped. The sugar price is being increased at will by the stakeholders. They deserve the strictest possible action.

It was observed that smuggling has depleted the strategic reserves of sugar in the country and particularly in the Punjab. These reserves were meant to meet the shortage of sugar in the coming year. There is 17% decrease in the cultivation of standing sugarcane crop. Next year, Pakistan may have to spend considerable foreign exchange on the import of sugar. This is a conspicuous writing on the wall.

The nexus of sugar millers and the brokers (each mill has five to six brokers who further sell sugar to dealers in the country) is responsible for price escalation. Pakistan had enough sugar this year. But keeping in view higher international prices, the sugar millers started smuggling sugar to Afghanistan.

Sugar price is escalated by the brokers through various WhatsApp groups. The sugar changes hands while lying in the mills and its price is skyrocketing like anything. Each new buyer adds up from Rs5 to Rs20 per kg. This process is supported by the sugar mills as their sugar too gets costlier without spending even a single penny, an official brief finds.

The situation of sugar availability is aggravating day by day and it is apprehended that the price will further go up. In other provinces, there will be an acute shortage of sugar and prices will be higher. There is an urgent need to check this worsening situation.

Brief recommended steps to get the stay orders vacated at the earliest otherwise the crisis would deepen. Without a notified price, the food department and the district administration cannot check hoarding or control prices.

The brief also recommended detaining the speculators/brokers, who have virtually played havoc with the sugar market, under MPO, which provides for such an action. Through our sources, detail of some speculators has been gathered and shared with the brief. There are still many others. Intelligence agencies may be tasked to unearth such speculation rackets, the official fact-finding report concluded.

Commenting on the Punjab government’s meeting and its outcome, a market observer said the government’s reservations about the stay orders may have some weight, but putting the entire blame on the stay orders is not fair. The stay orders did not restrain the district administration or border authorities from checking sugar at places away from mills or its smuggling, he maintained.