SUGAR industry has used its strong political clout to extract maximum profit from the pocket of helpless consumers. This happens every year before the crushing season starts.

The abnormal sugar price hike last year was linked to international factors rather than domestic causes. Now, when sugar prices have fallen in the international market and sugar millers are feeling threatened against import of cheap sugar, they have used their political clout to compel consumers to buy sugar at higher prices by persuading the government to impose 15 per cent regulatory duty on import of both raw and refined sugar.

The government has failed to control prices of automobile, cement and sugar. The speculative activities are acquiring legitimacy, the market abuse is rampant. The government is now a helpless spectator, watching exploitation of consumers in almost every commodity.

Prices of sugar are kept high because the sugar industry receives substantial support from the government. In particular, during 2003-2004, the government supported the industry by purchasing excess of 400 thousands tons of sugar through the Trading Corporation of Pakistan (TCP). Such support to industry helped prevent a sharp fall in sugar prices and protected the industry’s profitability. The industry leans on the government to serve as its marketing board.

The response from sugar millers was amazing as they unilaterally increased the ex-mill price of refined sugar substantially. The average retail price of sugar was Rs21 per kg on December 23, 2004 but started rising thereafter, crossing Rs40 per kg by June 2005—a rise of Rs19 per kg or more than 85 per cent in a short period of about six months.

The dilemma was that this unilateral increase in the ex-mill price was taken during the peak crushing season of last year. Such a massive increase in the ex-mill price had no economic justification.

The government’s response was puzzling as it allowed duty free import of raw sugar which had again placed bargaining power in the hands of sugar millers. Import of refined sugar was allowed in May 2005. By that time, the price in the international market went up substantially up.

In early October 2006, they persuaded the government to impose 15 per cent regulatory duty on import of sugar. Last year in October 2005, sugar millers in Sindh formed a cartel for not buying sugar cane above the support price fixed by the government.

The middleman sponsored so-called farmer’s cartel decided not to sell sugar cane below Rs72 per 40 kg. The demand of the farmers’ was supported by the argument that this rate is far below than the prevalent rate of sugarcane during the last sugar season and also below than the proportionate increase in the refined sugar prices.

The cartel of millers tried to specify a price that never existed for the last three years or so and this year when sugar cane production declined by almost 12 per cent, the demand to reduce prices of sugar cane was also against the economic rationale.

Sugar cane prices have remained in the vicinity of Rs65 to 80 per 40 kg for the last four years and being a major input this price should have been over Rs100 per 40 kg keeping in view the tremendous rise in sugar prices. The input prices have not risen commensurate with the output prices.

Sugar millers are not yet ready to pay cane growers the right price. The relationship between cane growers and millers has always remained sour and they are likely to remain so because the industry is not ready to pay the growers a fair price.

Millers escalate sugar prices by hoarding the commodity and creating an artificial shortage. The government came with the solution of selling sugar lying with the TCP through Utility Stores Corporation (USC) initially at Rs23 per Kg and later on at Rs27.5 per Kg to provide some stability to the price. These measures were limited in scope to bring the prices down and yet millers blamed the government for it.

These measures were not able to erode the capacity of sugar industry to manipulate prices as evident from the market. The powerful sugar millers kept their sugar in their ware houses until start of the season in October 2006. For the entire year, they continued saying there was a sugar shortage and now at the beginning of the new season they are making noises about clearing their stocks.

Now it is proved that the supply of sugar was more than enough for our consumption but sugar millers kept sending messages that sugar is in short supply to keep prices up. The government’s role during the entire period of the crisis was not up to the mark. Now, the millers are benefiting from the regulatory duty on imports of sugar.

The mill owners do not want to miss any opportunity of maximizing their profits by squeezing consumers. The growers too face serious problems from the sugar mills primarily on account of latter’s refusal to buy their crop, delayed lifting, delayed payments or lower than the market price and underweight of shipments. The sugar industry is selling sugar at twice as much price as the sugar mills in the neighbouring India where environment is the same.

In the past, the government has extended all its support and finances to improve the profitability of the sugar industry from the tax payer’s money. It has once again shown its all out support to millers.

The government had spent around Rs2 billion to safeguard the interest of the sugar millers in 2003-04 when sugar millers were in trouble. It has not shown any serious interest in protecting the interest of consumers. For a representative government, the interest of the ordinary consumer should be the first priority.