LAHORE- Pakistans most influential white-collar Mafia, the sugar industry, in connivance with the top politicians in the ruling party, and the State Bank of Pakistan (SBP) created artificial shortage, encouraged hoarding and plundered billions of rupees from the pockets of helpless consumers in the sapce of a few months. In-depth investigations carried out byThe Nation reveal that the sugar millers collected double-profit on the sugar stocks, as they got loans worth billions of rupees from private banks against the pledged stocks on above 10 per cent mark-up. After that they unleashed hoarding and created artificial shortage of the commodity that eventually led to price increase up to 60 per cent in the open market. The whole process, from artificial shortage of the commodity to price increase and panic buying took five to six months in which the sugar Mafia plundered billions of rupees just in a short span of time. At present, no matter that the government is floating tenders to import thousands of tons sugar, or the prices are slashed, the millers have successfully and technically done their job. According to the study carried out by this reporter, the ex-mill price of sugar was at Rs 3775 per 100-kg bag (Rs 37.75 per-kg) on January 30, 2009. The price increase trend picked up momentum in the open market. The SBP had stepped in to curb the sugar mills monopoly and restricted financing against the security of sugar stock on February 9, 2009. On February 16, 2009 the ex-mill price of sugar swelled to Rs 3800 per 100-kg bag. The SBP had directed all the banks to disallow fresh financing or renewal against hypothecation of sugar stocks. The SBP also instructed all banks and DFIs to enforce 50 per cent cash margin against the pledge of sugar in order to restrict and discourage hoarding of sugar. The dealers had expected that following the SBP intervention, panic selling could happen on part of sugar mills, as they are obliged to clear their advances that would also help cut price of the commodity. The SBP circular issued on February 9, 2009, available with TheNation, said: In order to discourage hoarding of sugar, banks/DFIs are advised to ensure meticulous compliance of the following instructions with immediate effect: All existing loans / advances against the security of sugar stock (disbursed before the crushing period of 2008) shall be fully adjusted latest by March 31st, 2009. Furthermore, loans / advances against fresh stock (disbursed after start of crushing period 2008) shall also be fully adjusted latest by July 31st, 2009. Any renewal / fresh disbursement of such loans / advances shall be made only after a clean up period of at least one month after the adjustment of loan. All renewals/fresh disbursements of financing facilities against sugar stock shall henceforth be subject to a minimum cash margin of 50 pc. The banks/DFIs shall not finance the cash margin themselves. The circular further said: No fresh financing/renewal will be allowed against hypothecation of sugar stocks. The Banks / DFIs will monitor the position of pledged sugar stocks and ensure that the release of pledged stock should result in corresponding reduction in outstanding loans / advances. The SBP had also warned that any violation of the above instructions shall attract punitive action under the relevant provisions of the Banking Companies Ordinance, 1962. The very next day, the Pakistan Sugar Mills Association Punjab Zone Chairman Javed Kayani urged the State Bank of Pakistan to immediately withdraw BPRD Circular No 2 wherein SBP issued instructions to all Banks and DFIs to enforce 50 per cent cash margin against pledge of sugar in order to restrict and discourage hoarding of sugar. Justifying his point he said the sugar industry was already facing difficult time and it was hard to off load sugar produced for twelve months in a period of three months from the date of close of Crushing Season. Chairman PSMA said that non-withdrawal of that circular would mean that banks would further increase their non-performing loans. He had also advised the State Bank of Pakistan not be hostile towards the sugar industry. In the meantime, the increase in ex-mill price of sugar continued and swelled to Rs 4270 per 100-kg on March 11,2009. The millers cut down sugar supply to the open market, created artificial shortage that triggered panic buying on part of the dealers and hoarders and later sugar price jumped to Rs 4350 per 100-kg bag on June 15, 2009. In March 2009, the Ministry of Industries floated tenders to import 200,000 tons of sugar to overcome shortage and at that time the price of sugar was considerably low in the international market. This development shocked the Sugar Mafia, which had become active and managed to force the Ministry of Industries to immediately cancel the sugar import tenders in connivance with the top politicians sitting at the helm of affairs. Not enough, the sugar Mafia in connivance with some high profile personalities, turned their guns towards the State Bank of Pakistan and forced the bank to withdraw its circular regarding the pledged stocks as they wanted to hoard the stocks for more sometime when the price were going up with every passing day. Finally, the succeeded and on July 16, 2009, the SBP giving the concession to sugar millers, set the new deadline for repayment of Rs 30 billion loans obtained by the sugar mills from the domestic banks. The central bank directed the banks/DFIs to ensure adjustment of entire loans/advances against pledge of sugar stock (both raw and refined) by October 31, 2009 positively, starting with 25pc reduction at end of July 2009, while further reduction with a formula of 25-25pc by end August, Sept and October 2009. On July 25, 2009 the sugar price surged to Rs 4680 per 100-kg while on August 21, 2009 the ex-mill sugar price touched record high level and was fixed at Rs 5250, thanks to top management of the SBP for paving way to the Mafia to plunder billions of rupees and taking U-turn from its earlier stance. Sources revealed that the Ministry of Industries and Commerce, SBP and some top politicians in the ruling party played key role in the entire sugar shortage drama and helped the Mafia rob the innocent public.