Rising sugar Prices

Govt fails to effectively stop sugar mills from holding back stocks to benefit from future price hikes

The recent spike in the price of sugar is a microcosm of government economic planners’ inability to coordinate a plan.

Export demand has caused the price of the staple commodity to rocket past Rs136 in the wholesale market, with projections that prices — already up Rs19 in just three weeks — could cross Rs150 in the coming week.

Consumer prices of Rs150 and higher have already been reported in several areas.

While the government and its allies blame hoarding for the problem, this is only partially correct.

Prices have spiked because the government did not have a plan in place that prioritised domestic demand over export demand, forcing domestic consumers to face the entire price shock.

Meanwhile, despite the government’s tall claims regarding improvements along the Afghan border, sugar smuggling continues freely, again reducing supply for domestic consumers.

The government’s first mistake was probably the loosening of import restrictions in January without taking proper measures to ensure the commodity was available in market-ready condition to meet domestic supply for several months in advance.

Despite commodities experts saying the country has enough stock to meet demand for the next six months, sugar mills are holding back stocks to benefit from future price hikes.

Meanwhile, market players have already picked up on the large increase in the control price of sugarcane and are using it as a baseline to increase the prices of old stocks — meaning that the control price, which is meant to help small farmers, is actually only helping mill owners and large scale farmers.

And despite experts’ estimates that Pakistan has enough sugar stock available to meet domestic demand for several months, domestic sugar output is down by about 15% for the fiscal year to date, and had been projected to decline several months ago.

This raises further questions about why exports were encouraged and which particular sugar barons the move was meant to benefit, since it has certainly not helped the citizenry.