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MUMBAI: Opportunity and necessity may be knocking in the sugar trade between Pakistan and India, which in turn is raising hopes of greater trade between the arch rivals. The nuclear-armed south Asian neighbours, who have fought three wars in half a century, import commodities from countries as far as South America, despite having the surpluses to meet each other’s needs.
Officially, trade between India and Pakistan stands at a paltry $500 million, although trade routed through other countries likely exceeds $2 billion.
Economic ties have been strengthening between the two countries. It is unclear, however, how the attack on a holy site in northern India on Tuesday will exacerbate sectarian tensions between both the countries.
Hindu opposition groups were calling on Wednesday on the centrist government of Prime Minister Manmohan Singh to call off peace talks with Islamabad.
Nevertheless, a tempting opportunity for co-operation between the arch rivals comes in the sugar trade, with Pakistan struggling to stem rising domestic prices following a 20 per cent drop in its own output.
Indian millers will also be eyeing a potentially lucrative opening as they need to export 200,000 to 300,000 tons of refined sugar in the next three months. Under a special programme, they were allowed to import raw sugar duty free as long as they exported the refined product in two years.
“Opportunities don’t present themselves everytime,” said S. L. Jain, director general of Indian Sugar Mills Association. “It can be a good opportunity for Indian millers to fulfil some of their export obligations.”
TEMPTING PRICES: An official at Pakistan’s state-run buying agency said while the country plans to buy up to 100,000 tons of sugar this week, Indian cargoes would not be considered for these purchases.
This is largely because of Pakistan’s bitter experience in 2000 and 2001 when about 800,000 tons of sugar imported from India depressed prices and crushed the local industry.
But traders say that sooner or later, Pakistan will buy from India because the alternatives are costly. Cargoes from Brazil take 45 days to arrive and come with high freight charges, which would do nothing to contain domestic prices.
Indian sugar moved by land to Pakistan would be about $20-a-ton cheaper than sugar transported from overseas, due to savings on port handling charges and inland movement costs.
“The idea is to control high prices in Pakistan and that will come down only when they buy from India. Other sources will be costlier,” said an Indian sugar trader.
World sugar prices have been rising, partly on news that Pakistan is planning to buy sugar. London white sugar futures rose more than $33 in one month to about $274 a ton.
Pakistan needs 300,000 to 400,000 tons of sugar in the coming months to control prices ahead of the fasting month of Ramazan in October.
“It’s difficult to see from where else they can source sugar so fast and at a competitive price,” said Narendra Murkumbi, managing director of India’s Shree Renuka Sugars Ltd.
SHADOW OF GUNS: While peace talks launched last year after the rivals went to the brink of war in 2002 are moving slowly, there are signs of greater economic integration.
A bus service across the divided Kashmir region has been launched and talks are proceeding on a pipeline across Pakistan to bring Iranian gas to India. The door is also seen gradually opening up on bilateral trade in wheat and cotton.
“It will certainly benefit both the countries but guns must stop. You can’t have business under the shadow of guns,” said economist B.B. Bhattacharya, vice chancellor of the Jawaharlal Nehru University.
Last week Pakistan removed all taxes on wheat imports, including from India, so it can make up for a shortfall after bad weather trimmed this year’s wheat crop.—Reuters
