In Pakistan, cycles of wheat and sugar scandals rob the poor

Earlier this month, the Federal Investigation Agency (FIA) concluded a report on the rising prices of wheat flour and white sugar in the country.

It blames the flour and sugar cartels monopolizing the trade of these two essential commodities for hoarding and price manipulation. For those who know the deep connections between businesses of all stripe, politics and power, it is hardly surprising. 
For decades, the sugar producers and wheat traders have often created artificial shortages by controlling supplies in the market that caused a sharp rise in prices. The windfall profits further enriched sugar and flour-mill owners, the hoarders and wholesale dealers working as partners. The upper and middle classes are not much affected by prices of any such commodities but it is the vast majority of the poor trying to make ends meet that have to see their economic situation worsen further. These include families living on daily wages with no savings, and forced to pay more for two essential food items. 

The question is, why do shortages happen in a country that produces surplus wheat and sugar? Let me start with wheat. The cycles of wheat crises and the multiple actors involved in it. I know this problem first hand, as I am myself a producer of this crop, and have been over the past three decades. 

The interesting thing is that the sugar mill owners demanded a subsidy of Rs10 per kg by making the false statement that the prices of sugar in the world market were higher than the prices in Pakistan. The Punjab government ended up paying a subsidy of Rs20 billion, the Sindh government dealt out about that much as well. It was a false claim-- the cartels have played these tricks for decades, robbing the public as well as the government.

Rasul Bakhsh Rais

At the time of sowing the wheat crop around November, the government fixes the purchase price to incentivise farmers to produce more. Each province has a food department that procures wheat when it is harvested in April-May. Here’s the rub. The governments in the past have bought lesser quantity for building reserves than was available. The farmers under pressure to settle their seasonal debts to moneylenders pay bribes to officials or sell at a lower rate to traders who buy for hoarding. As the FIA report indicates, the high officials responsible for opening the procurement centers delay it deliberately to put the farmers under pressure, as they cannot store or risk leaving the crop ready in the fields. 

The hoarders and smugglers of wheat start buying much earlier, and at lower prices earlier than the problem-ridden official purchases. Last year, much of the crop was lifted by such elements because the food minister, the federal secretary of food security and the provincial minister purposely delayed it. Hoarding paid back hugely, as they manipulated the supplies in the months of February and March. Interestingly, Khyber Pakhtunkhwa, bordering Afghanistan has a large number of flour mills, allegedly meant for smuggling flour to the neighbor and beyond.

On to sugar. Pakistan is water-stressed country but it has made a rapid transition to sowing larger acreage of water guzzling sugarcane crop in areas where cotton used to be grown. The major landowners in Sindh and Punjab have double stakes in the farming as well as in the sugar industry. The most critical element in the corrupt triangle is politics. 
The Omni business groups which owns most of the sugar mills in Sindh is allegedly owned by the powerful Zardari family that has been ruling this province for decades. The other political dynasty, the Sharif family of Punjab has quite a few sugar mills of its own. The report on sugar and wheat scandals lists every major political family, business houses, the ministers and the bureaucrats responsible for the price manipulation.

The government of Pakistan Tehreek-e-Insaf is itself at fault, as it pushed through a decision through the Economic Coordination Committee that has representation of all the provinces, to export surplus stocks of sugar and wheat late last year. 
The country produces around 24-27 million tons of wheat and 5-6 million tons of sugar annually, depending on weather conditions. For the current season, the estimates are on the higher side. The interesting thing is that the sugar mill owners demanded a subsidy of Rs10 per kg by making the false statement that the prices of sugar in the world market were higher than the prices in Pakistan. The Punjab government ended up paying a subsidy of Rs20 billion, the Sindh government dealt out about that much as well. It was a false claim-- the cartels have played these tricks for decades, robbing the public as well as the government.

The only departure from the past is that the PTI government ordered the inquiry and has made the summary report public. It is also promising strict action once the detailed report with a forensic audit is presented toward the end of the month. The Prime Minister now faces the daunting task of punishing the cartels when its members are in the parliament, in the government, and can manipulate even his own fall. Let us keep our fingers crossed.

*Rasul Bakhsh Rais is Professor of Political Science in the Department of Humanities and Social Sciences, LUMS, Lahore. His latest book is “Islam, Ethnicity and Power Politics: Constructing Pakistan’s National Identity” (Oxford University Press, 2017).
Twitter: @RasulRais