Govt allows 200,000 tonnes more sugar export

The government has decided to allow the export of 200,000 metric tonnes more sugar, despite last year's similar decision escalating prices to Rs220 per kilogram and an International Monetary Fund (IMF) report exposing the "intertwined relationship between economic elites and state regulators" in the sector.

Deputy Prime Minister Ishaq Dar chaired the steering committee on sugar, which decided to allow the export, a senior government official told The Express Tribune after the meeting. A summary will be placed before the Economic Coordination Committee (ECC) for approval. It is the second time in three weeks that the government has allowed sugar exports. The ECC on August 19 allowed the export of 108,000 metric tonnes of imported sugar.

According to a statement from Dar's office, he "expressed satisfaction over the availability of sufficient sugar stocks in the country, noting that current stocks, together with anticipated production, are adequate to meet requirements well into the next crushing season". Federal Minister for National Food Security Rana Tanveer Hussain confirmed the development, saying, "After meeting requirements till the start of the crushing season, the country will still have over 600,000 metric tonnes of surplus sugar and out of this 200,000 will be exported subject to the ECC decision."

Hussain said the steering committee also decided to develop a mechanism to ensure prices do not increase despite the export. Dar's office noted that he underscored the need for continued vigilance, effective coordination and timely measures to ensure food security, market stability and availability of essential commodities at affordable rates.

It was claimed during the meeting that the decision may not cause a significant increase in prices. However, past trends suggest prices increase far more than official claims due to sugar export decisions. The ministry of national food security admitted last month before the ECC that the decision to allow sugar exports last year, coupled with a 15% decline in production, had pushed prices to Rs220 per kilogram.

Sugar prices are currently 18% lower than a year ago due to better production, with the commodity selling at an average price of Rs148 per kg.

The government has also floated a tender to import 750,000 metric tonnes of wheat, as prices have soared over 75% in the domestic market due to failures of the Punjab and Sindh governments to procure the commodity against approved targets. In June last year, the government allowed the import of 500,000 metric tonnes of sugar after it first exported 790,000 metric tonnes, creating a shortfall and allowing millers to make windfall gains.

Millers had been allowed to export sugar after the government signed an agreement with the Pakistan Sugar Mills Association (PSMA) to keep ex-factory sugar prices between Rs165 and Rs171 per kilogram until October 15, 2025. But millers breached the agreement and prices skyrocketed to Rs220 per kg. As against the decision to import 500,000 metric tonnes, the government imported only 300,000 metric tonnes.

Govt ignores IMF, again

The IMF's Governance and Corruption Diagnostic Assessment report, released in November last year, exposed a nexus between the sugar sector and the state.

"The sugar sector provides a case study of how the intertwined relationship between economic elites and state regulators combine to capture public benefits at deep costs to the overall public," the report stated.

Firms in the sugar sector benefited from favourable government policies, subsidies and regulatory loopholes for decades, mainly due to the nexus between industry magnates and political leaders, the report added.

Sugar mill owners, many of whom hold government positions, have ensured highly recommended prices for sugarcane and protective tariffs, keeping operations profitable at the expense of competitiveness. They have also influenced export and pricing policies to their advantage, the IMF said.

The report cited the 2018-19 sugar export decision, stating that the government allowed significant sugar exports, even subsidising them, which created domestic shortages and price spikes. A high-profile investigation by the Federal Investigation Agency (FIA) found that leading sugar mill owners colluded to create artificial shortages and manipulate prices despite ample warehouse stocks.

The FIA uncovered fraudulent practices, including speculative hoarding and laundering of illicit profits through fake accounts. The inquiry named political heavyweights as culprits and confirmed that an export push, approved by government officials tied to the industry, had caused domestic prices to soar.

The IMF report further stated that the sugar sector is an example of weak enforcement leading to anti-competitive behaviour, discretion in decision-making and negative impact on consumers.

Around 90 licensed sugar mills operate in Pakistan, with a significant number owned by political party leaders and current or past elected legislators, according to the IMF report.

Considering its findings, the IMF imposed a condition to end the government's role in the sugar sector and to give a policy by June this year for "full liberalisation of the sugar sector". The IMF will review implementation of the decision during its visit to Pakistan this month.