Severe shortage of sugar sparks ban on exports

ECC revises prior decision, says ban on sugar export already in place post August 10, 2023

ISLAMABAD:

The interim government, on Monday, directed for swift taken action to be taken to curb the smuggling of sugar after authorities revealed a stark reality: Pakistan’s sugar reserves have dwindled to a mere 2.3 million metric tonnes (MMT), insufficient to meet requirements before the onset of the next crushing season. This shortage has been exacerbated by a 100% price increase since the decision to allow export.

Revelations surfaced during a recent session of the newly constituted Economic Coordination Committee (ECC) of the Cabinet. The disclosure reinforced concerns that the sugar industry and the previous government had inflated sugar production figures while downplaying consumption, creating a margin to export 250,000 metric tonnes of sugar.

Contrary to January’s claims that a two-month surplus stock would be available by November 2023, even after exporting 250,000 metric tonnes, the ECC was informed that Pakistan would experience a sugar deficit before the season even began. At prevailing consumption rates, a surplus of 1.3 million tonnes should have been projected for November, as opposed to the predicted shortfall.

“The FBR has reported on August 15, 2023, that only 2.27 MMT of sugar remains in stocks, which will barely meet domestic consumption needs before the start of the next crushing season,” conveyed the Ministry of Food to the ECC. The meeting’s proceedings indicated a monthly sugar consumption of 641,584 metric tonnes.

This disclosure has surfaced at a time when citizens are already grappling with backbreaking electricity bills and now soaring sugar prices. The earlier government’s decision to permit the export of 250,000 metric tonnes of sugar not only immediately escalated prices but is also anticipated to further fuel inflation due to the projected scarcity.

In response, the ECC has mandated regular reports on sugar stock availability, consumption, and pricing to facilitate ongoing monitoring. A press statement by the Ministry of Finance confirmed this directive. Notably, this marks the first official statement from Finance Minister Dr Shamshad Akhtar since assuming her role. The ECC session, chaired by Dr Akhtar, also included the attendance of Dr Waqar Masood Khan, Advisor to the PM on Finance.

Earlier this year, the PDM government sanctioned the export of 250,000 metric tonnes of sugar based on industry claims of record-breaking production of 8 MMT during the 2022 crushing season, predicting an excess of at least 2 months’ worth of sugar before November 2023. On the basis of this claim, Ishaq Dar allowed the export of sugar. However, this move led to price surges and raised concerns.

Sources said that days before the end of the PDM government, a proposal to allow the import of sugar was moved but was deferred for the caretaker setup.

Amid these circumstances, the Ministry of Food appealed to the ECC on Monday to rescind the sugar export quota and impose a ban on sugar exports.

The ECC revisited its prior decision concerning the export quota and, following thorough deliberation, affirmed that the ban on sugar export was already in place post-August 10, 2023, according to the Finance Ministry.

Furthermore, the ECC directed the Ministry of National Food Security & Research (MoNFSR) to collaborate with pertinent agencies to combat sugar smuggling and hoarding. Additionally, the ECC requested immediate data on wheat stocks, availability, and prices from the MoNFSR. Since the PDM government authorised sugar exports, commodity prices have nearly doubled. In January, sugar prices hovered around Rs85 per kilogram, but as per the Pakistan Bureau of Statistics (PBS), this figure skyrocketed to Rs165 per kg last week.

The price surge began immediately after the export permission, and in April, the previous government fixed the price at Rs98.25 per kg to obscure the repercussions of its erroneous decision. However, the Lahore High Court (LHC) suspended the price-fixing order.

ECC received information indicating that the Sindh government raised sugarcane prices to Rs425 per 40 kg, a 41% increase from the previous year. This escalation will further exert pressure on sugar prices as the industry and stockists are likely to hoard the commodity for profiteering. In parallel, interim Prime Minister Anwaarul Haq Kakar reconstituted the ECC, which convened its inaugural meeting on Monday.

The ECC’s mandate includes monitoring the price situation to ensure stability for essential goods used by the common man. Ironically, ECC decisions under the PTI and PDM governments contributed to price hikes due to untimely sugar export decisions benefiting vested interests.

 

Published in The Express Tribune, August 29^th, 2023.

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