Pakistan sugar production falls after end of support price

In late 2024, the federal government negotiated a new IMF deal; in exchange, Pakistan ended the minimum support price. It was expected to have massive consequences, especially for the wheat and sugar industry. Today at the National Assembly standing committee for food security, one felt those consequences.

Federal Minister Rana Tanveer Hussain explained that last year, sugar production was 7.6 million tons while domestic demand was 6.3 million tons, leaving a surplus of 1.3 million tons, which had negatively affected the industry. This year, sugar production was estimated at 7.2 million tons, but actual production remained 5.8 million tons.

"The government has reduced sugar prices from Rs 210 per kg, and no subsidy was provided on sugar exports." Without the support price, the surplus only harmed the farmer.

Committee member Rana Hayat urged the authorities to provide some protection to farmers going forward. Officials from the Ministry of Food Security noted that wheat prices had increased due to floods but are now under control. Rana Hayat questioned why sugar prices were not being similarly regulated, warning that importing sugar during the crushing season could harm farmers.

Rana Tanveer Hussain added that last year, sugarcane production fell 1 million tons below the target. “We allowed surplus sugar exports, which earned $450 million in foreign exchange. Now, we are importing sugar worth $150 million, and the price increase was caused by the mafia,” he said. He further mentioned that a bumper sugarcane crop is expected this year.

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The minister also highlighted that wheat production has declined due to the absence of support prices, and a further decrease is expected this year. The government has decided to consult the IMF to restore wheat support prices and is trying to convince the IMF to ease restrictions on food items.

Rana Tanveer Hussain said that reduced government control has caused wheat prices to rise in the market. A new wheat policy is expected to be implemented from the first week of October, aiming to protect both farmers and consumers.

"If wheat production drops by another 6 per cent this year, Pakistan may need to import wheat worth $1.5 billion, which would place a significant burden on the national treasury."

Wheat production suffered immensely once the support price ended, which was already low with the MSP not available, and now wheat supply has reached dangeroulsy low levels with the floods.

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This year, sugar prices saw a recent rise due to mafia influence. Authorities have consistently blamed the steep prices on alleged collusion among influential actors in the sugar sector, often referred to as the “sugar mafia,” which is accused of hoarding and manipulating supply to inflate prices. In response to the crisis, the federal government had previously announced a temporary removal of import taxes on sugar in an effort to bring down domestic prices.

The Wholesale Grocers Association has consistently criticised the import-based approach and instead urged the government to take strong action against hoarders. They have called for warehouse inspections and crackdowns on illegal stockpiling, arguing that such enforcement could significantly reduce sugar prices in the local market.