Consumers suffer as misuse of govt subsidy goes unchecked

Consumers suffer as misuse of govt subsidy goes unchecked - price of sugar


ISLAMABAD: The misuse of government subsidy goes on unchecked in Pakistan as happens in cases of sugar and wheat.

Ramazan package, an annual feature, is no exception, though it is supposed to provide some solace to the country’s citizens from rising prices in the holy month. But subsidy under this package proves to be a blessing for some suppliers, who provide adulterated products to the Utility Stores Corporation (USC) at higher prices.

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Other market players, particularly fruit vendors, also become active in Ramazan to extract extra money from the pockets of consumers. Fruit prices go up exorbitantly whether they are melons, bananas and mangoes, which are in high demand in the month.

Perturbed over unbelievably high prices and lack of any significant action on the part of government, the consumers this time around launched a social media campaign and announced a three-day boycott of fruits a couple of weeks ago. According to some reports, this move succeeded in bringing down prices for at least a short while.

Besides substandard goods supply to the USC under the subsidy package, there are other methods that are applied to misuse the facility in Ramazan.

In one such tactic, USC regional heads join hands with the retailers. They sell subsidised products to the retailers instead of offering the goods to consumers at utility stores. This way, they deprive the common man of subsidised essential commodities and share hefty profits with open market retailers.

Consumers have no choice but to buy subsidised goods at market prices from the retailers. With this black market of subsidised items, the government fails to achieve desired results of the subsidy programme.

Secondly, USC retail outlets charge more than the subsidised rates in remote areas where people are not properly aware of the subsidy. The outlets pocket the subsidy that is actually allocated for the common man.

Apart from these, the history of USC is replete with many scams in the purchase of edible and other products at higher prices.

The government had been so upset with the misuse of subsidy that the Economic Coordination Committee (ECC) decided to conduct a special audit to assess the amount of relief claimed by the USC for 11 essential goods and bring the case back for further review.

In Ramazan last year, the ECC, while noting higher prices of different commodities, agreed to conduct a study on the cost of food items. However, despite a gap of around one year, no study has been sent to the ECC so far.

At that time, Planning and Development Minister Ahsan Iqbal insisted that stability in prices of basic food items was essential to help the consumers.

“In developed economies, prices of food items remain unchanged, however, in Pakistan, especially during Ramazan, prices of all food items, including fruits, are increased manifold,” he said.

Last year, sugar millers pocketed billions of rupees in collusion with the top management of USC by selling the sweetener at higher-than-prevailing market prices, which caused heavy losses to the national exchequer and consumers.

The disclosure was made in an ECC meeting held on February 13, 2017.

During the huddle, the USC managing director said the chain of state-owned stores purchased sugar from mills for Rs73 per kg and sold at Rs65. The revelation upset the ECC members, who called for undertaking a special audit of the utility stores.

Earlier, the ECC in its meeting on December 28, 2016 was informed that the Inter-Ministerial Committee, constituted by Prime Minister Nawaz Sharif, had assessed price trends in international and domestic markets and noted that sugar rates had dropped from $597 per ton in September 2016 to $490 on December 20, 2016 in the world market.

The committee noted that the sugarcane price had remained stable at Rs180 per 40 kg in Punjab since 2014-15 and was slightly increased by Rs10 in Sindh.

However, according to the Sensitive Price Indicator, the retail price of sugar in the domestic market during the week ended December 15, 2016 stood higher at Rs62.61 per kg compared with Rs54.12 in December 2014 and Rs57.16 in December 2015.

This also showed that USC purchased sugar at a higher price – Rs73 per kg – compared to the market rates, which caused a loss not only to the public exchequer, but consumers were also fleeced.

The ECC directed the Finance Division to ask the Auditor General of Pakistan to carry out a special audit of subsidy claims in the next 15 days. However, the report has not been made public so far.

Prices of essentials soar ahead of Ramazan

In January 2017, Chief Justice of Pakistan (CJP) Mian Saqib Nisar also took suo motu notice of the sale of substandard and adulterated cooking oil at USC outlets. According to reports of the National Institute of Health (NIH), the cooking oil sold at the utility stores did not conform to the standards prescribed under the West Pakistan Pure Food Ordinance.

In Ramazan this year, the government has allocated Rs1.6 billion in subsidy for the consumers. However, who will be the real beneficiaries is not known as the money may go into the pockets of USC officials as well as goods suppliers.

Published in The Express Tribune, June 16th, 2017.