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Competition Commission issues Pakistan mills notices over sugar cartelisation

Accuses them of manipulating the sugar price

SAMAA | - Posted: Nov 10, 2020 | Last Updated: 7 months ago
Posted: Nov 10, 2020 | Last Updated: 7 months ago

The Competition Commission of Pakistan has issued show-cause notices to the Pakistan Sugar Mills Association and its 84 member mills regarding multiple instances of cartelisation of sugar.

The PSMA and all 84 sugar mills violated competition laws by collectively deciding to export sugar and thereby fixing the quantities of sugar to be supplied in Pakistan, the CCP said.

Similarly, they violated the law by reducing stocks of sugar through exports, hence collectively raised and maintained prices of sugar in Pakistan.

The notices were issued after the CCP decided to initiate proceedings following an inquiry into anti-competitive activities in the sugar sector.

The CCP inquiry found multiple instances where the PMSA was acting as a front-runner for cartelisation in the sugar industry.

Evidence gathered during search and inspections conducted on the premises of PSMA and JDW Sugar Mills seems to suggest these anti-competitive activities were continued since 2010, according to the CCP.

The impounded data included exchange of emails between a senior official of one of the sugar mill (a PMSA member) and PSMA Punjab zone office-bearers regarding sensitive commercial information such as mill-wise, district-wise sugar stock position, and even the quantity of cane crushed, sugar produced, recovery percentage, carry forward old/raw sugar, total sugar, quantity sold, balance and sold percentage.

Moreover, an analysis of the WhatsApp messages exchanged in a group of PSMA officials, the same senior official of that sugar mill was found to be in constant communication with regard to price and stock related data of sugar mills. The impounded data indicated the senior official’s continued involvement in sharing/receiving sensitive information regarding the sugar industry since 2012 when he was nominated as the focal person for coordinating the sugar stock position by the PSMA.

Furthermore, the PSMA’s platform was being used by member sugar mills to collectively make commercially sensitive decisions such as reduction in domestic stocks/supplies of sugar, which led to an increase in or maintenance of desired price levels in the relevant market, according to CCP findings.

The PSMA and its members have been provided an opportunity of hearing to plead their case with reference to the specific violations indicated therein.

It said 15 sugar mills in Punjab, under the auspices of PSMA, collectively decided to delay crushing of sugarcane in 2019-20, leading to a reduction in quantity supplied to the market. In Punjab, 45 sugar mills used the PSMA’s platform to share business-sensitive information with each other.

The PSMA and sugar mills divided quantities of sugar in tenders issued by the Utility Stores Corporation on various occasions. The CCP found 19 mills in Punjab to have violated the law with regard to a tender in 2019, while it issued notices to 30 mills from all over the country regarding an earlier tender.

The findings of the CCP’s previous sugar inquiry report in 2009 had suggested that the PSMA and its members had been engaged in fixing prices and collusion in the purchase of sugarcane, production of sugar as well as its sale or trade.

“It appears that the PSMA and its member mills sought to keep prices stable by controlling the supply of sugar available in the domestic market,” the CCP report said.

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