Sugar prices expected to fall but not significantly despite greater supply

RGST, increase in sugarcane prices the reasons, say millers.

KARACHI: Sugar prices are not expected to decrease significantly despite the expected influx of newly crushed sugar into the market, according to sugar mill owners.

The sweetener’s current ex-mill price, excluding taxation, is Rs72 per kilogramme and is expected to increase by Rs8 per kg after the imposition of the reformed general sales tax (RGST), said All Pakistan Sugar Mills Association Chairman Javed Kiyani while talking to The Express Tribune.

The tax per kilogramme is supposed to increase from Rs3 to Rs8 and sugar’s ex-mill price is expected to be Rs80 per kg as a result driving the retail price to Rs85 per kg, explained Kiyani.

Despite consumer, government and trader expectations that the price of sugar will fall following an increase in supply, a decrease is unlikely due to the imposition of the RGST and the unofficial increase in sugarcane prices, he remarked.

The government had fixed the price of sugarcane in Punjab and Khyber-Pakhtunkhwa at Rs125 per maund but sugar mills had been receiving a limited quantity of sugarcane at Rs200 per maund, said Kiyani, adding that the cost of production had increased as a result and thus the ex-mill price of sugar was Rs72 per kg.

He said that production in 14 sugar mills in Sindh and five to six mills in Punjab has started. A further 11 mills have heated their boilers in preparation.

Kiyani said that the newly crushed sugar will enter markets by the end of next week.

Imported sugar running out in Karachi

According to Karachi Wholesale Grocers Association Chairman Anees Majeed, imported sugar was being sold at Rs65 per kg and locally produced sugar at Rs80 per kg in the city’s wholesale markets.

Majeed added that the stock of imported sugar was running out in the wholesale market because supply from the Trading Corporation of Pakistan’s warehouses had not been received for two days.

According to a trader in the city’s wholesale market, the ex-mill price of the newly crushed sugar is Rs77 per kg and the wholesale price is Rs78.50 per kg. Sugar was being sold at some fixed price in the wholesale market but retailers were still choosing to price the commodity as they wished, he added.

Published in The Express Tribune, November 25^th, 2010.