ISLAMABAD: A senior government official privy to forensic investigations into the 2019 sugar and wheat crises has said hurdles such as finding the ‘required’ forensic experts and closure of mills caused delay in completion of detailed audit.

Prime Minister Imran Khan had ordered a commission to conduct a forensic audit by April 25 after the initial reports of the Federal Investigation Agency (FIA) exposed the alleged involvement of the ruling Pakistan Tehreek-i-Insaf (PTI) stalwarts Jehangir Tareen and Food Minister Khusro Bakhtiar as well as leaders of its allies, Monis Elahi, or their close relatives in the food crises.

The government official, who did not want to be named, disclosed to Dawn that it was impossible for the inquiry commission to conduct forensic audit of all sugar and wheat flour mills within three weeks. Therefore, he added, the commission had sought three more weeks to finalise the reports.

The official said if the misdeeds of some sugar barons had not been exposed by the media the prices of sugar were expected to range between Rs110 and Rs120 per kg during this Ramazan.

The current coronavirus situation also drastically declined sugar consumption in the country, otherwise its price would have skyrocketed, he added.

Describes hurdles in finding ‘required’ forensic experts as one of the causes for delay

The official said before criticising the government and any institution for “delay” in the completion of the reports one should know what the forensic audit is. “Investigation from end to end is a simple definition of forensic audit in which it is determined through documentary evidences, inspections and interviews that at which price sugarcane was purchased and, what price was given to the growers, what was the production cost, how much taxes were given by the industry, ex-mill price of sugar and at what price and to when it was sold etc. He said the experiment of conducting forensic audit of industries was new in the country as a result the inquiry commission on sugar and wheat crisis had been facing some problems in it.

“First of all when we decided for forensic investigations, initially we could not find the required forensic experts in the market to do the job,” the official added.

Another problem was the closure of mills due to coronavirus as the owners were not ready to open their mills until the commission warned them that the commission would break open the mills on its own if they did not cooperate. “On this warning, the mills owners agreed to open their factories for forensic audit.”

The official said there was an informal and covert system of increasing price in sugar industry that was called Satta. “We have reports that the price of sugar was to be increased to Rs110 to Rs120 per kg during current Ramazan through Satta but when the initial inquiry reports were published in the media those involved in the illegal business stopped increasing the price of the commodity,” he added.

He said the forensic report would explain how Satta was played in sugar industry.

PSMA rejects allegations

However, a senior office-bearer of the Pakistan Sugar Mills Association (PSMA) rejected the allegations levelled in initial inquiry report and in a section of media regarding the alleged wrongdoings of sugar mill owners.

He said it was wrongly mentioned in the report that sugar industry had eaten up billions of subsidy in the past illegally. “The subsidy is given after clearance of various departments including the State Bank of Pakistan, and not only sugar industry but also industries like Pakistan International Airlines, Pakistan Steel Mills and textile industry have consumed Rs800 billion subsidy,” he said, adding that the government must devise a system to check illegality in businesses.

The PSMA office-bearer said India gave the highest subsidy to the mill owners which was Rs22 per kg while in Pakistan it was Rs5 per kg and the production cost was Rs12 per kg.

Responding to a question about expected hike in the price of sugar, he said the demand of sugar always determined its cost as it cost had not increased this Ramazan, because all businesses were closed or slowed down due to the spread of coronavirus.

He said systems in Federal Board of Revenue (FBR) should be revamped. “For example, we have suggested to the FBR to install a computerised system that every sack of sugar carrying bar code can be checked and monitored when it is released from the mills,” he added.

Interestingly, the initial report on sugar had revealed that two main groups had obtained maximum benefit in the crisis. One of the groups, JWD, belongs to PTI stalwart Jehangir Tareen that has six sugar mills obtained 12.28 per cent of total export subsidy amounting to Rs3.058 billion during 20150-18. Makhdoom Syed Ahmed Mehmud is also partner in this group.

The report also said that in the past few years the production of sugar was historically more than the local requirements, and it was imperative to probe and include this aspect related to sugar export, subsidy given, its impact on local sugar prices and eventually major beneficiaries of such export subsidies, if any. It said the exporters gained benefit of it in two ways. Firstly, they were able to gain subsidy and secondly they made profit from increasing sugar prices in the local market [the price increased from Rs55 per kg in December 2018 to Rs71.44 per kg in June 2019 although the GST increase was implemented from July 2019].

Published in Dawn, April 27th, 2020