Sugar sector ‘cartelization’: 127 cases involving Rs44bn CCP penalty stuck in courts

ISLAMABAD: There are a total of 127 cases pending before different judicial forums related to the alleged cartelization of the sugar sector as the Competition Commission of Pakistan (CCP) imposed a penalty of Rs44 billion but recovered nothing.

The CCP is literally stalled in recovery of its penalty mainly because of stay orders from the courts. Presently, there are 127 pending cases in alleged sugar cartelization across various courts delaying the recovery of the Rs44 billion penalty imposed by CCP on the sugar cartel. This comprises 24 cases pending before the Supreme Court, 25 in the Lahore High Court, 6 in the Sindh High Court, and 72 in the Competition Appellate Tribunal.

Since July 2023, the Competition Appellate Tribunal has been dysfunctional. The appointment of its chairman is delayed due to the stringent criteria outlined in Section 43 of the Competition Act, 2010. According to these criteria, the chairman must be a retired judge of the Supreme Court or a retired Chief Justice of the High Court. This criterion poses a serious challenge in finding a suitable candidate.

Pakistan’s economic landscape has long been marred by market power concentration and market abuse, the influential sugar sector being one of such examples. With 84 are operational mills producing around 6 and 8 million metric tonnes of sugar annually, however, the nation regularly faces sugar shortages, while the industrialists amass billions in profits.

The alleged cartels, smuggling, and hoarding unfairly influence sugar prices. The government has recently taken steps to combat these issues through the Special Investment Facilitation Council (SIFC), reducing sugar prices and ensuring regular supply.

The CCP has so far twice investigated the sugar sector, proved alleged cartelization by Pakistan Sugar Mill Association (PSMA) and its members. But both times, the sugar industry obtained stay orders from courts to block CCP’s enforcement moves which always remained a hard nut to crack.

In 2009, a CCP’s investigation found alleged cartelization of PSMA and sugar mills. While the Commission bench’s order was being prepared for issuance, the sugar industry obtained a stay order from Sindh High Court. In 2021, the CCP passed another order against PSMA and 82 sugar mills and imposed a penalty of Rs44 billion. But PSMA and sugar mills obtained stay orders from courts.

Other than enforcement, CCP has provided advisory to the government on sugar sector. In 2009, a one-man commission, headed by the then CCP chairman submitted its report to Supreme Court. The report recommended that the sugar sector be allowed to work on free market basis.

In 2009, the CCP issued a policy note opposing the federal government’s agreement with the PSMA, deeming it anti-competitive.

In 2012, CCP issued a policy note recommending lifting a five-year ban on establishing new sugar mills and expanding existing ones in Punjab. The ban, still intact, created legal barriers to entry and was likely to make it easier for existing players to collude.

In 2018, the CCP issued an opinion following an open hearing. Among other things, the opinion urged the abolition of the price floor/support price for sugarcane.

In 2021, the CCP opposed the Punjab government’s decision to fix sugar prices at Rs85 per kilogram. CCP argued that price fixing by government leads to unintended consequences such as hoarding, price hikes, and smuggling.