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Collusion in brokered market: JDW and other sugar mills involved in gambling to increase prices artificially

Aftab Ahmed

Islamabad: The Inquiry Commission on Sugar has found JDW sugar mills owned by Jahangir Khan Tareen allegedly involved in gambling in collusion with stock market brokers to make money by increasing prices through speculations.

‘Satta” is the speculative sale and has become common practice in sugar market throughout Pakistan. No actual investment or sale or lifting of sugar is involved in SATTA It is simply a form of gambling.

Forward contracts and more so SATTA sales affect the market. Speculation about the increased or decreased rates of Satta in the market affects the price accordingly. The upward speculation results in perception of Increased demand against the supply which will result in price hike.

The Audit Team of JDW Sugar Mills found some additional information about “SATTA” from interviews as well as forensic analysis of mobile/computers of renowned sugar brokers of Punjab. During his interview with the Team, broker Mr. Aslam stated that during the month of March 2020, he has executed forward trades of around 11,135 trucks amounting to Rs. 10,292,219000 with the JDW Company and Ittehad Sugar Mills.

He further shared data of forward contracts which he has in turn made with other brokers of the market for the months of March and April for around 4,179 trucks at rates of up to Rs. 7950 per K. As per Mr. Aslam, the persons with whom he has made these forward contracts are either investors themselves or they have black money to hide in the form of investment.

These brokers then trade further with other brokers multiple times and the rate of sugar keeps rising as eventually the last person who has the forward contract at the time of maturity of the contract has to deposit payment in the sugar mill’s bank account. The investors meanwhile settle their trades on positive/negative margins whatever the case may be as speculation business may go either way.

This process goes on simultaneously in the market for multiple mills and is happening on daily basis which creates perception of higher demand for sugar which in reality is much less. Another such broker is Mr. Abad Ali who purchased 54,000 bags of sugar (225 trucks) amounting to Rs. 174,225000 from JDW during the current year. Further, during the years 2018-19 and 2017-18 Mr. Abad purchased 451,200 bags of sugar aggregating to Rs. 1133,625000 and , 150,034 bags aggregating to Rs. 345,537,600 respectively.

Brokers buy sugar from Hunza Sugar Mills on forward contracts and sell these in the sugar market to other dealers/brokers. Upon the maturity of the forward contract, if the broker is making profit, he takes delivery of the sugar. However, in the event of loss, the “Biyana” of the broker is forfeited to the sugar mill if he does not lift the sugar. 129 The evidence collected shows that one such broker Shahzad Faisal made forward contract of 6,300 M.T (525 Trucks) for the month of March and April 2020. He paid advance amount (Biyana) of Rs. 11,250,000 for 4800 M.T of sugar to Mill.

Heera Broker in his statement admitted that the stock of sugar was not lifted by him on th maturity of forward contract i.e. 31-03-2020 due to decrease in prices of sugar in the market resulting In forfeiture of his “Blyana” by the MI I and he suffered a loss of Rs. 9,1390,000/- while the Mill has illegally earned the said amount Further, the Mill has total forfeited a total amount of Rs. 293281,401 “Biyana” and shown it as “advances from suga dealers” as of September 30, 2019. 132 The Audit Team of JDW Sugar Mills found some additional information about “SATTA” from interviews as well as forensic analysis of mobile/computers of renowned sugar brokers of Punjab.

During his interview with the Team, broker Mr. Aslam stated that during the month of March 2020, he has executed forward trades of around 11,135 tnicks amounting to Rs. 10,292,219000 with the JDW Company and Ittehad Sugar Mills, He further shared data of forward contracts which he has in turn made with other brokers of the market for the months of March and April for around 4,179 trucks at rates of up to Rs. 7950 per K. As per Mr. Aslam, the persons with whom he has made these forward contracts are either investors themselves or they have black money to hide in the form of investment.

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