ISLAMABAD: To check the possibility of anti-competitive activities in the sugar industry, the Competition Commission of Pakistan (CCP) on Monday carried out a search and inspection of Pakistan Sugar Mills Association (PSMA)’s Lahore and Islamabad offices.

The CCP authorised its officers to ‘Enter and Search’ PSMA premises as part of an ongoing enquiry against the possible violations of Competition Act, 2010 by the sugar industry.

The indications received by the CCP related to anti-competitive activities of PSMA included collective stoppage of crushing in season 2019-20, collective rise in prices of sugar, and refusal to supply sugar to Utility Store Corporation (USC) as recently reported etc.

Through its various enforcement orders, the CCP warned industry associations from indulging in activities, which may violate the Competition Act.

“The rule of thumb is that the associations are not allowed to discuss, deliberate or share sensitive commercial information that may allow its members, who are competitors, to coordinate business policy or discussion on economic aspects,” the spokesman said. The initial inquiry of the CCP was related to collection of events and incidents such as closure of mills and subsequent recommencement of crushing operations, indicate the possibility of a collective strategy on part of sugar mills to delay crushing season.

Among the most obvious one relates to increase in price of sugar across Pakistan and the initial CCP inquiry report states that PSMA had issued a statement to the media on July 11, “There is not at all sugar crisis in our country. Sugar stocks are available in Pakistan, but millers are unable to sale [sic] sugar at the rate of Rs65. The total cost on one kg sugar was Rs72. Then how it is possible to sell it at the rate of Rs63”.

The CCP inquiry had noted that PSMA’s stance has been that the increase in prices was due to rising cost of production however, by its own admission, the purported cost of production is Rs72.

The anti-trust watchdog’s ongoing inquiry has observed that in the same statement, PSMA also claimed that there were enough stocks of sugar in the country while retail price of refined sugar witnessed an exponential increase especially between July and August across all cities with the media even reporting that in some places, such as Peshawar, the commodity was selling for as high as Rs110 per kg.

According to the CCP, these reports also suggest that the hike was at the sugar millers’ end who had increased the price to wholesalers which was then passed on to consumers.

The CCP has also referred to the data from Pakistan Bureau of Statistics (‘PBS’) showing increasing trend in the retail price of sugar from January to August; a rise of around Rs11 per kg or by 27 per cent in Peshawar, 22pc Islamabad, 26pc in Lahore and 29pc in Karachi.

The ongoing inquiry has further referred to reports that USC had asked for supply of sugar at Rs63 per kg so that it could be sold at Rs70 to consumers. However, in a letter to the Ministry of Industries and Production, the PSMA indicated to sell sugar to it at Rs70 per kg instead of the Rs63 price demanded by the ministry.

Published in Dawn, September 15th, 2020