Group#12,

GROUP#12
Topic: Sugar Industry
and Public Sector
Interference

SUGAR INDUSTRY AND PUBLIC

SECTOR INTERFERENCE

GROUP MEMBERS
• Salar Ahmad Rauf
• Shahmir Ahmad Malik
• Muhammad Ateeb
 Group#12, Topic: Sugar

CONTENTS
Industry and Public
Sector Interference

➢ Introduction
i. History
ii. Industrial
iii. Economical
iv. Agricultural

➢ Process
➢ Political Interference
➢ Environmental Impacts
➢ Cartelization
➢ Solutions
 Group#12, Topic: Sugar
Industry and Public
Historical Background Sector Interference

▪ Only 2 sugar mills

in 1947
▪ Annual production
was 7,932 tons
▪ Over the years, the
number has
drastically
increased
▪ At present (2021),
there are 81 sugar
mills
 Group#12, Topic: Sugar
Industry and Public
Industrial Background Sector Interference

▪ Major increase in the SUGAR MILLS

90
1980’s till 2000 (43) 81
80 76 76
▪ Annual production
70
increased from 60
7,932tons to above 5 50
51

million metric tons 40

SUGAR MILLS
33
▪ Punjab: 40 mills 30
▪ Sindh: 32 mills 20
18

▪ KPK: 9 mills 10
2
6

0
1940 1950 1960 1970 1980 1990 2000 2010 2020
 Group#12, Topic: Sugar
Industry and Public
Sector Interference

Balochistan
Sugar Mills
PROVINCE # OF SUGAR MILLS 0%

Punjab 40 KPK
11%

Sindh 32

KPK 9 Punjab Punjab

49% Sindh
KPK

Balochistan 0 Sindh
Balochistan

40%
 Group#12, Topic: Sugar
Industry and Public
Sector Interference

▪ Punjab is 70%
% of Sugar Production
65%
dominated with a 60%

production share 50%

of 65%
40%
▪ Sindh with 25%
production share 30%
25%

▪ KPK with a share 20%

production of 10% 10%

10%

▪ Baluchistan out of 0%
0%

league Punjab Sindh KPK Balochistan

 Group#12, Topic: Sugar
Industry and Public
Sector Interference
Economical Background

▪ Pakistan’s one of the largest

agro-based industry
▪ 100,000 labor force
▪ Roughly 9 million rural
population involved in this
industry
▪ GDP contribution is 1.9%. So,
changing something in this
industry means affecting GDP,
poverty, and unemployment
 Group#12, Topic: Sugar
Industry and Public
PROCESS Sector Interference

▪ Sampling
▪ Cleaning
▪ Slicing
▪ Diffusion
▪ Purification
▪ Evaporation
▪ Crystallization
 Group#12, Topic: Sugar
Industry and Public
Political Sector Interference

Interference
 Group#12, Topic: Sugar
Industry and Public
Sector Interference
▪ 40 out of 81 sugar
mills
directly/indirectly
owned by
politicians
▪ 50% control of
sugar market in
hands of the
politicians
(JDW:16%,
Zardari:9 mills)
▪ PSMA an
exception, as all
political elites
work in harmony
 Group#12, Topic: Sugar
▪ Secured consistent support from Industry and Public
respective governments in Sector Interference
financial, political, and policy
aspects
▪ Therefore, very hard to separate
industry elites from political
leaderships
▪ Government has helped sugar
industry:
i. in the from of export subsidies,
ii. By keeping it out of international
competition, providing them a
captive local market through high
import duties.
▪ Pakistanis paying the price for
sugar higher than the price in
international markets.
 Group#12, Topic: Sugar
Industry and Public
Sector Interference
▪ During General Parvez Musharraf’s
regime, a ban was imposed:
i. Setting up new sugar mills
ii. Relocation of existing sugar mills

▪ However, two tycoons of the sugar

industry received a special favor from
the dictator, and set up new mills in
South Punjab

▪ A child's play for sugar mafia to

defy government directives
without any fear
Group#12, Topic: Sugar
Industry and Public
Sector Interference
 Group#12, Topic: Sugar
SCANDALS / WAYS Industry and Public
Sector Interference
❖Current government, PTI
faced shortage of sugar.
A report by Sugar
Forensic Commission
(SFC) revealed 6 sugar
mills as cartels, having
51% of total supply.
❖Under-reporting of sales
for years
❖Satta:
i. Advance payment
ii. Delayed payment
 Group#12, Topic: Sugar
Industry and Public
Sector Interference
ENVIRONMENTAL IMPACT
 Group#12, Topic:
Sugar
HOW DOES SUGARCANE PRODUCTION POLLUTE Industry and Public
THE ENVIRONMENT Sector Interference

• The sugar production process is

known to produce substantial levels of
solid waste, water and noise pollution.
The highly polluted wastewater and
chemical sludge from sugar mills, in
particular, poses a substantial danger
to health and environmental quality.
• Sugarcane production also pollutes
freshwater ecosystems with silt and
fertilizers washed from farms
 Group#12, Topic: Sugar Industry and Public
Sector Interference
INEFFICIENT ALLOCATION OF SCARCE RESOURCES

• 213 gallons of water is required to produce

one pound of sugar.
• Pakistan is a country where water is a scarce
resource. Using such high quantities to
produce sugar is quite problematic as there
are many regions of Pakistan that are
deprived of water.
• The social benefit that can be derived from
redirecting the supply of water from the
sugar industry to residential areas barren of
water is extremely immense.
 Group#12, Topic: Sugar Industry and Public
Sector Interference

ADVERSE ENVIRONMENTAL IMPACT A

CONSEQUENCE OF POLITICAL INTERFERENCE?

• The environmental problems are all linked with the issue of political
interference in the sugar industry.
• Powerful politicians and landowners are involved in the sugar manufacturing
business which ultimately leads to them having autonomy over manufacturing
processes and the power to avoid the governments’ regulatory policies.
• This is what leads to poor waste management, over use of scarce resources,
and adverse environmental implications of the sugar industry as there is weak
implementation of stringent environmental protection policies.
 Group#12, Topic:
Sugar Industry and
SOLUTIONS TO CURTAIL DIRECT ADVERSE Public Sector
ENVIRONMENTAL IMPLICATIONS Interference

• Periodic waste audits.

• Efficient irrigation systems.
• Encourage compliance with environmental standards.
• Rational chemical use.
 Group#12, Topic: Sugar Industry and Public
Sector Interference

THE ISSUE OF PUBLIC SECTOR INTERFERENCE

• Responsibility of regulation belongs to the state. But the state has given a poor
display of strict implementation of regulatory policies.
• Many decision seem to favor the powerful landowners and politicians
involved.
2 Possible courses of action:
i. The state successfully and strictly implements policies that do not seem to
act in the favor of those who are powerful.
ii. The sugar industry is left at the mercy of the market. The market through the
forces of supply and demand has the possibility of regulating the producers
attempt of artificially inflating the prices through curtailing demand.
 Group#12, Topic: Sugar
Industry and Public
Sector Interference
IS THE SUGAR INDUSTRY A CARTEL?

• Cartel: An association of
manufacturers or suppliers with
the purpose of maintaining
prices at a high level and
restricting competition.
• Besides high political influence
there are other factors which
must be taken into account
 Group#12, Topic: Sugar
Industry and Public
Sector Interference

THE LICENSE RAJ

• In order to set up a sugar mill an investor must obtain a license from
the government of Pakistan.
• Not easy to obtain a license

Year Total Number Of Sugar Mills

1997 71
2020 81

• Only 10 mills added in the last 20 years

 Group#12, Topic: Sugar
Industry and Public
Sector Interference
ILLEGAL TACTICS

• Frequent use of benami accounts to avoid taxes and maintain inventory.

• The industry usually misrepresents data leading to the government
making uninformed decisions (2020 Sugar Crisis)
• Mills withhold cash payments from farmers for indefinite periods often
stretching for more than one crushing season before dues are finally
settled.
• Manipulate retail price of sugar by engaging in speculation (satta) in
the informal futures market
 Group#12, Topic: Sugar
Industry and Public
Sector Interference

BLACKMAILING GOVERNMENT

• Sugar crop support price based

on weight of sugarcane
• Sugarcane cannot be stored for
long periods of time
• Sugar mills delay crushing which
affects farmers and indirectly
puts pressure on the government.
 Group#12, Topic: Sugar
Industry and Public
Sector Interference
EFFECTS OF CARTELIZATION

• Highly unproductive sugar mills

with no competition
• Consumers are paying more for
sugar while farmers are receiving
less for their crop (Total Market
Failure)
• Massive levels of tax evasion and
damage to the government
exchequer in the form of subsidies
 Group#12, Topic: Sugar
Industry and Public
Sector Interference

SOLUTIONS

• Abolish license requirements

• Reduce taxes on import of sugar
• Introduce a track and trace system to maintain accurate data on
inventory levels
• Remove support price for sugar
• Take action against illegal speculation (satta) markets and formalize
the commodity exchange.
Group#12, Topic: Sugar
Industry and Public
Sector Interference