Govt sets sugar price at Rs164/kg

The government on Wednesday fixed the retail price of sugar at Rs164 per kilogram, which is 13% higher than it had set at the time of allowing the export of 600,000 metric tonnes of sugar, giving millers the bonanza of earning higher revenues from local and overseas markets.

The decision was taken by a 10-member committee led by Deputy Prime Minister Ishaq Dar. The committee fixed new ex-factory and retail prices of sugar after negotiating with the Pakistan Sugar Mills Association (PSMA) – the entity that is accused of operating as a cartel by the nation's antitrust watchdog.

The committee also fixed the ex-factory price at Rs159 per kilogram in consultation with the PSMA – also higher by Rs19 or 13.5% compared to the earlier maximum threshold.

The deputy prime minister announced the decision through X – the social media platform.

Dar said that the sugar retail price will be Rs164 per kilogram and the ex-mill price will be Rs159 for one month. The prices are higher by Rs19 per kg or over 13%. The Rs1 increase in price gives Rs2.8 billion in additional benefit to the sugar mills.

The decision marks a departure from the government's earlier action of fixing the ex-factory price at Rs140 and the retail price at Rs145 per kg when it had allowed the export of sugar last year. The Rs19 per kg benefit to the millers is contrary to the earlier decision that sugar prices would remain unchanged despite the exports.

On Monday, the government had told the millers that their production cost, inclusive of taxes, was Rs154 per kg, but the millers claimed that it was Rs174.

The per-kilogram price of sugar has shot up to an average of Rs172 as of last Friday – Rs27 per kg higher than the same week of the last year, according to the Pakistan Bureau of Statistics.

The prime minister had set up the Dar-led committee after average sugar prices jumped by Rs10 within a week and Rs27 compared to last year, according to the national data-collecting agency. It also reported that the maximum national price skyrocketed to Rs180 per kg in Karachi and Islamabad.

A key reason behind the increase in sugar prices was Prime Minister Shehbaz Sharif's decision to allow sugar exports. The PBS on Monday stated that the country exported 757,779 metric tonnes of sugar from July to February of this fiscal year.

Compared to last year, when only 33,101 metric tonnes of sugar had been exported, there was a 2,190% increase in exports in this fiscal year, the data showed. In terms of value, the exporters earned $407 million during the July-February period, which was also $386 million or 1,831% higher than the previous fiscal year, the PBS data showed.

Dar said that a sub-committee has also been constituted under the chairmanship of Minister of Food Rana Tanveer Husain. He said the sub-committee would review sugar prices and come up with recommendations.

The deputy prime minister said that sugar would still be sold at Rs130 per kg at 274 special bazaars being set up across the country. He said that there would not be any shortage of the commodity.

He added that sugar mills would start the crushing season from November this year, and in case of a delay, action will be taken against them.

However, such warnings had also been given in the past.

The government's decision to fix sugar prices is likely to create distortions in the market, and is also against the advice of the Competition Commission of Pakistan – the antitrust watchdog. The government fixed the price in consultation with the PSMA, which is accused of being a cartel.

The CCP said this week that it has been actively working to curb cartelisation in the sugar industry. In 2020, the CCP launched an inquiry into the sector, which revealed that sugar mills were prima facie engaged in price-fixing and controlling supply through coordinated actions facilitated by the PSMA.

The antitrust watchdog said that in August 2021, the CCP imposed a record Rs44 billion in penalties on sugar mills and the PSMA—one of the highest fines in its history. However, the decision was challenged in courts, and stay orders were issued by the Sindh and Lahore High Courts, as well as the Competition Appellate Tribunal (CAT). This has delayed the recovery of penalties, it added.

Its first inquiry in 2009 found prima facie evidence of PSMA's involvement in price-fixing and the manipulation of production and supply quotas.

Over the years, the CCP has issued multiple policy notes and recommended the federal and provincial governments to reduce market distortions.

The CCP said that currently, about 127 cases related to sugar cartelisation are pending in various courts, including 24 in the Supreme Court, 25 in the Lahore High Court, six in the Sindh High Court, and 72 in the Competition Appellate Tribunal.