Sugar mills filing ‘fake subsidy claims’

LAHORE –  The Haseeb Waqas Group of Companies chairman, in a letter to the authorities, has revealed a big scam by the sugar mill owners who are allegedly making millions of rupees through fraudulent claims for freight-support subsidy showing fake exports.

Mian Ilyas Meraj, chairman of the said group of companies, has addressed the letter to the chief justice of Pakistan, the prime minister, the commerce minister and the Punjab chief minister while its copies have been endorsed to the NAB chairman, FIA DG, FBR chairman, the State Bank governor and heads of other departments concerned at the federal and provincial level.

As per details, only three sugar mills, M/s Huda Sugar Mills, M/s RYK Sugar Mills and Two Star Industries, are causing Rs 1.25 billion loss in addition to the losses caused by fake sugar export to Afghanistan.

Haseeb Waqas Mills is one of the sugar producing units against whom the Lahore High Court has passed orders that their shifting to new places was illegal. The court has also directed the deputy commissioners to remove and shift these sugar mills to their original places.

The deputy commissioners concerned have also been directed to remove Ch Sugar Mills, Ittefaq Sugar Mills and Haseeb Waqas Sugar Mills from their new locations in Rahimyar Khan, Muzaffargarh and Bahawalpur to their previous locations in central Punjab.

These sugar mills had relocated their units from central Punjab to southern Punjab (cotton belt) without seeking prior permission of the competent authority in contravention of the Punjab Industries (Control on Establishment & Enlargement), Ordinance 1963, as well as ban imposed by the Punjab government through its notification No AEA-III-3-5/2003 (Vol-III), dated 06.12.2006. 

The complaints against these mills had been lodged by M/s RYK Mills, M/s Tandalianwala Sugar Mills and M/s Ashraf Sugar Mills, alleging M/s Haseeb Waqas Group, M/s Ittefaq Group and CSML Group had established new sugar mills in South Punjab in violation of the rules.

In his letter, the Haseeb Waqas Sugar Mills chairman has pointed out that the national exchequer is facing a big loss as the companies like M/s Hunza Sugar Mills Limited, Huda Sugar Mills, Two Star Industries and RYK Sugar Millis are involved in the fraud. These mills are also operating their benami accounts, he alleged, adding they have been committing a massive sales tax evasion for several years.

He has further alleged that his investigation had uncovered at least nine benami bank accounts being operated by sponsors and directors of M/s Hunza Sugar Mills Limited in the name of one Zubair Siddiqui among others. The said company is currently facing proceedings in the FBR, being at various stages of prosecution.

Mentioning the modus operandi, the letter states, “Most of the sugar produced by this company is in the undeclared category on which no taxes are paid at any stage and sales revenue is either routed through benami bank accounts or received in cash.” However, the document reads, “A small portion of sugar production finds its way to the reported category and is shown as exported by this company, enabling it to lodge fraudulent claims for a freight-support subsidy”.

The letter further says it is a well-known fact in the sugar markets of KP that M/s Hunza Sugar Mills, for the purposes of just paperwork, sells the product to Afghanistan-based traders at the rate of Rs 33 per kg and pays no sales tax on this quantity. Subsequently, a freight-support subsidy claim is lodged with the already burdened national exchequer amounting to Rs 11 per kg. M/s Hunza Sugar Mills Limited, showing fake export of 49,000 metric tons, is the largest, but not the only perpetrator of this scam, as other complicit industries are M/s Two Star Industries (35,000 metric tons), M/s RYK Mills (27,000 metric tons) and M/s Huda Sugar Mills (14,000 metric tons). The total loss caused to the national exchequer is over Rs 1.25 billion.

The letter further alleges that this huge damage to the treasury is in addition to the losses caused once the sugar supposedly exported for Rs 33 per kg is smuggled back to Pakistan and is sold at Rs 50 per kg in the KP market. The worst part of this scam, according to the letter, is that the already generous and unfair subsidy being provided to this tax-evading entity is clear violation of the government’s own policy which requires the sugar mills to start sugarcane crushing at full capacity, but all of them are still in a state of shutdown.

The letter states the owners and sponsors of these tax-evading sugar manufacturers are extremely well-connected.

The Haseeb Waqas Group of Companies chairman, through this letter, has expressed the hope that the new NAB chairman would take action against the sugar mafia from causing further harm to the national exchequer and the sponsors would not be allowed to roam free as has been done in the case of the Orient Electronics owners who have been allowed to go free after causing over Rs 4 billion loss to the treasury.

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