LAHORE: Punjab Chief Minister Usman Buzdar could be in hot water as the Sugar Commission report, made public by the government on Thursday, found his granting of Rs3bn in subsidy to sugar mills as ‘unjustified’ and also doubted the statement he gave before the commission.
The Commission proved the fact that a few weeks before the issue was referred for provincial cabinet consideration and without even waiting for the minutes of the ECC on sugar subsidy, the Punjab government in a meeting chaired by Buzdar had decided in principle to give Rs3 billion subsidy to the sugar mills.
Interestingly, when the chief minister was confronted by the Commission with these facts, which negated his statements, Buzdar said he had forgotten what he had decided before the cabinet meeting. The Commission report confirmed all the disclosures made by The News in its series of investigative stories published in the first half of April this year. These stories include “Scandalous details of how Punjab approved sugar subsidy” published on April 9, “Hasty Buzdar sanctioned sugar subsidy” published on April 10 and “ECC’s double game set the stage for sugar subsidy” published on April 11.
“The Commission is of the view that this subsidy granted is unjustified,” the Commission report said, adding, “The Chief Minister Punjab pleaded his case that the subsidy was granted by the Cabinet and it was a collective decision. However, keeping in view the minutes of the meeting dated 06-12-2018, which the CM Punjab claims to have forgotten, clearly indicates otherwise.” The report said that Buzdar appeared before the Commission and have a briefing about the grant of subsidy by the provincial government. “He explained that the subsidy was discussed in the meeting of the Cabinet Committee on Sugar sector on 17-12-2018 which recommended the subsidy which was approved by the Cabinet in its meeting dated 29-12-2018.”
When the chief minister was asked by the Commission about the minutes of the meeting that he had chaired on 06-12-2018 which clearly talked of “an in-principle decision to allow subsidy,” to the sugar mills of Punjab at the rate of Rs5.35 per kg, Buzdar told the Commission that he did not remember this meeting at all.
The Commission also found that the in-principle decision taken on 06-12-2018 was made even before the decision of the ECC meeting held on 04-12-2018. According to minutes of the provincial cabinet’s meeting, dated 29-12-2018, the “Secretary Food briefed the Cabinet meeting, on provision of subsidy on export of sugar, held under the Chairmanship of Chief Minister Punjab on 06-12-2018, in the light of verbal information on decisions of ECC dated 04-12-2018”.
It was also noted by the Commission that when the Punjab food secretary moved the summary for granting subsidy on 22-12-2018 which was approved by the cabinet in its meeting held on 29-12-2018, it contained a proposal of calculations to grant subsidy as allowed during 2017-18 at a rate of Rs.5.35 per kg. by the Punjab government. However, no calculations were made by the food secretary regarding the cost of production, international prices of sugar, currency exchange rate and the resulting differential cost.
The report added, “It is pertinent to mention here that when the subsidy was granted in 2017-18, the US Dollar conversion rate was Rs.105 per dollar while it was Rs.138.89 per dollar at the time of making this decision of subsidy. It was the same stock of sugar. In this summary of Secretary Food Punjab, the sliding scale was applied from US Dollar 343.80 to US Dollar 435 per metric ton. The upper end of the sliding scale (which matches the cost of production as per PSMA) indicates a cost of Rs.60.42 per kg of sugar (435)(138.89/1000=Rs. 60.42 per kg).
While in 2017-18, when the federal government granted the subsidy, the cost of production was calculated at Rs.52.46 per kg (499×105.4/1000=Rs. 52.60 per kg). If the amount of subsidy of Rs.5.35 per kg. was taken out from Rs.60.42, it would have [sic] resulted in Rs 55.07 per kg. This figure is still above the cost of production calculated by federal government at Rs.52.46 per kg. Since, it was the same stock of sugar of 2017-18 for which the cost of production was calculated by Ministry of 1&P (industries and production) at Rs 52.46 per kg, there was no justification for providing the subsidy after the devaluation of rupee against US dollar.
The report said that the then food secretary, Shaukat AH, when asked by the Commission about the above calculation, said that this was something that had been overlooked and admitted his mistake. It added, “the Commission is of the view that this grant of subsidy is unjustified. The Chief Minister Punjab pleaded his case that the subsidy was granted by the Cabinet and it was a collective decision. However, keeping in view the minutes of the meeting dated 06-12-2018, which the CM Punjab claims to have forgotten, clearly indicates otherwise.”