New sugar crisis?

The recent spike in sugar prices in Pakistan has caused concern among consumers and stakeholders alike. Although the most recent increase is relatively small — between Rs7 and Rs10 per kg in most areas — there is legitimate cause for concern if the government approves sugar exports, as mill owners are demanding.

The millers are demanding the import of about 1.5 million tonnes of sugar this year, which would eat away at the surplus the country built up in the last year or so after first allowing exports, and then requiring imports of the commodity at unfavourable prices. A few months back, prices rose as high as Rs185 per kg — about Rs50 more than the average rate today — and the caretaker government approved sugar exports at relatively high prices to counter widespread hoarding and smuggling of the sweet stuff. The ensuing glut built up large government stocks, which helped reduce prices and insulated the commodity from erratic price changes caused by hoarding and commodity speculation.

While some analysts claim the government is currently overstocked, it would be wise to find a balance that allows the provincial governments to maintain healthy reserves. Exporting too much would eat away at those reserves, allowing unscrupulous players to potentially manipulate the situation once again.

A welcome event was the meeting between Prime Minister Shehbaz Sharif and several stakeholders, during which substantial time was dedicated to market manipulation and how the government would respond to it and other illegal practices. But despite the meetings, another reason for public concern is that while mill owners claim reserves are sufficient to export without affecting domestic prices, the sugar barons have done little over the past decade to show the public that they are acting in good faith. Meanwhile, despite mountains of evidence of illegal practices, successive governments’ failure to take action against them increases the perception that what the barons want, the barons get.

Published in The Express Tribune, April 29^th, 2024.

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