Sugar which is already being sold at Rs. 160 per kg in retail, up more than 60 percent from Rs. 98 during mid-April, may shoot up again despite the government’s efforts to prevent it from getting completely out of the reach of common people.
The government has finally entered into the regulator mode with the caretaker setup set to take the reins, although sugar prices, for all the right or wrong reasons, are rising for the past three months. Both sides blame different factors for the hike in the price of the basic commodity.
Recently, Punjab Government imposed Food Stuff Order 2023 which authorized the district administration to lift the stock from the sugar mills which will be supplied in the market to stabilize the prices. Administration can also register cases against the owner and the dealer with up to three years of imprisonment. According to reports, nearly a dozen sugar mills still have 0.2 million tons of sugar which they can’t hold for more than fifteen days.
Critics argue that sugar mills have pocketed illegal profits of up to Rs. 25 billion since April since sugar prices cannot be increased without government approval through the Sugar Advisory Board. Moreover, the sugar already sold is not being lifted from the warehouses and is being further traded to jack up the prices.
The minister for National Food Security & Research reportedly alleged in a recent meeting of the Senate Standing Committee that the export numbers were fudged to trick the government into giving export orders and hinted at investigations since as per him, exports resulted in the price hike.
The spokesperson from Pakistan Sugar Mills Association (PSMA) was not available for comment but they have previously argued for the rise in the cost of sugar production reaching Rs. 130 per kg and a 70 percent rise in markup rates as the primary reason behind the price increase instead of exports.
On the other hand, market sources claim that all these actions will eventually prove futile and any change in the retail price will be temporary.
“Government has itself bought the sugar for utility stores at Rs. 140 per kg so it’s unlikely it will be sold at lower than that price. Secondly, these actions may have pressurized the market in the short run, but there is a strong possibility it may result in a stronger rebound once the incumbent government leaves the office” stated a commodity market consultant while talking to ProPakistani
He added that the government is only showing the teeth since it’s entering an election month but the caretaker setup will not have a similar appetite or the ability to exercise its control. He also pointed out that Sindh Government has already announced the minimum support price of Rs. 450 for sugarcane while Punjab is also expected to follow and these factors may further fuel the market pricing.
Current crop outlook will be critical
Sugarcane has historically been a success story as far as large-scale adoption and production trend is concerned, now whether we attribute it to the unchecked growth of sugar mills, that’s a whole different story. Although the prices are projected to rise regardless of the crop output because of the minimum support price, in case of lower production the increase can be severe.
Pakistan’s sugarcane production has increased by nearly 35 percent in the last ten years from 67.7 million tonnes in FY14 to 91 million tonnes in FY23. The increase has mostly been horizontal meaning due to the increase in cultivated area while our per acre productivity still stands below regional competitors.
So far the weather was largely favorable for all the crops including sugarcane but the recent blitz of torrential rains has damaged sugarcane across small belts in Southern Punjab adjacent to Sindh. Another factor that might play a role is a decline in fertilizer intake due to the exuberant rise in urea prices due to excise duty, hoarding and smuggling.
The government needs to be at least proactive in its approaches to address these issues. The track and trace system could have been better utilized and the same measures being taken now could have been taken earlier to accurately assess the sugar stocks.
It’s understandable for commodity prices to increase with the rise of minimum support prices of crops but this is last year’s stock and since sugarcane crushing ends in March, this rise in prices clearly seems to be on pure market sentiments rather than some demand-supply gaps.
