Sugar prices shoot up

LAHORE: Sugar crisis in the country has taken a turn for the worst as sugar mills have sold 95 per cent of their stocks but prices of the commodity continue to spiral every day.

Sugar prices in the last month increased by around Rs10-14. The product was available for Rs69-72 per kg on August 1, but is currently being sold for Rs80-86 per kg.

Industry stakeholders believe the rates would further rise in coming weeks, as sugar stocks are very low while imported sugar has not reached on time. The delay in the arrival of sugar would cause a gap between demand and supply, they said, adding that other reasons had also contributed to the sugar crisis and the sharp price increase.

Pakistan Sugar Mills Association (PSMA) chairman Iskander M Khan, said that the cabinet had decided to ban the export of raw sugar and stop smuggling of gur to Afghanistan, but the decision was not taken seriously.

He said that raw sugar was smuggled to Afghanistan, where prices are very high. “The country lost at least 100,000 tons of sugar due to smuggling,” he explained.

“We have even consumed re-melting stock and now only 300,000 tons of sugar is left,” he said, adding it is the lowest-ever level of sugar stock at mills.

Khan said re-melting stocks are used to recycle and make new sugar and normally 40,000-50,000 tons of sugar remain in mills.

“This year, we have neither re-melting nor any carryover stocks,” he lamented. He said the millers should not be blamed for the sugar shortage, as stocks are already close to depletion.

“The lethargic attitude of the Trading Corporation of Pakistan (TCP) concerning the shortage of sugar resulted in a delayed decision to import sugar. It caused a shortage in local market and prices started increasing,” he added.

On July 29, the Economic Coordination Committee (ECC) had directed the TCP to finish the ongoing sugar import of 575,000 tons by making all possible efforts to open tenders for the remaining 375,000 tons, but the TCP could not import sugar on time. Consequently, the price of sugar increased in the local market.

The price of sugar in the international market is currently hovering at $750 per ton and its landed cost at Karachi airport is around Rs70-72 per kilogramme. If transportation charges to other cities are included, then the price increases to Rs75-77 per kg. The price excludes sales tax and any other federal duties.

According to the Federal Board of Revenue, the government has lost around Rs2.5 billion to date due to reduced sales tax on sugar.

Sugar Dealers Association Punjab President Rana Muhammad Ayub said imported sugar would arrive by the end of September and would cost around Rs75 per kilogramme. He said after arrival of sugar, prices would stabilise around Rs82-85 per kilogramme.

Sugar production in fiscal year 2009-10 amounted to 3.1 million tons and carryover stocks from 2009 were 500,000 tons. However, this year Pakistan does not have any carryover stocks. Average sugar production in one year has been around 3.7 million tons.

Published in The Express Tribune, September 4^th, 2010.