PM slaps ban on sugar export amid crisis

Updated February 08, 2020

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Go-ahead given months after country exported 141,447 metric tonnes of sugar, according to PBS. — Ap/File
Go-ahead given months after country exported 141,447 metric tonnes of sugar, according to PBS. — Ap/File

ISLAMABAD: While sugar prices have been on the rise in domestic market for the past couple of months, Prime Minister Imran Khan on Friday approved a summary to ban sugar export and to allow the import of 300,000 tonnes sugar through the private sector in a bid to control price hike.

PM Khan gave the go-ahead months after the country had exported 141,447 metric tonnes of sugar, according to Pakistan Bureau of Statistics.

While approving the summary, the premier also decided that white sugar would be imported through private sector without taxes and duties and no financial support would be provided to the importers by federal or provincial governments.

The decision will be implemented after its approval from the Economic Coordination Committee (ECC), being the competent forum, which is likely to meet on Saturday or Monday. After an ECC decision on the issue, the federal cabinet will give a formal approval in its meeting on Tuesday.

Sugar prices had started rising a couple of months ago, but as the government had put the issue on the backburner, it only added to already troubled market to the benefit of profiteers and hoarders.

A well placed official source told Dawn that the PM on Friday approved the summary before its submission to the ECC to immediately stop the export of 350,000 tonnes of the remaining export quota of sugar and to simultaneously allow import of 300,000 tonnes of sugar through the private sector.

Between July and December 2019, Pakistan had exported 141,447 metric tonnes of sugar, according to official statistics.

Average retail price of per kilogram of sugar was Rs53.75 in 2017-18, Rs61.43 in 2016-17, Rs64.03 in 2015-16 and Rs58.91 in 2014-15, respectively. One rupee increase in one-kg sugar means a net transfer of Rs5.1 billion from consumers.

The annual domestic sugar consumption ranges between 5.1m tonnes and 6m tonnes.

Background interviews with stakeholders and senior officials show a host of issues, leading to the rising trend in sugar price in domestic market, with the result that Pakistan might be importing sugar after eight years.

In last three weeks, sugar price in international market has reached $418 from $350 per tonne. This indicates that if the government exempts all duty and taxes on sugar import, sugar will cost Rs85 per kg at Karachi port while its transportation to other parts of the country will add to its price.

The government has increased sales tax on domestic sugar from eight per cent in the last budget to 17pc. While reversal in sales tax rate could lead to lowering of sugar price in domestic market, this issue was not in government’s consideration, it emerged during the background interviews with the stakeholders and officials.

Current stock

It was noted in a recent meeting of Sugar Advisory Board that 1.719m tonnes of sugar stock was available in the country. Traditionally, a strategic reserve of two months is maintained in the country with monthly requirement of 0.458 million tonnes.

While sugar stock is available for three months, the position will further improve when the crushing season will complete in March. As the prices showed upward trend despite the reports of sufficient stock, the premier took serious notice of the situation and issued directives to check hoarding and profiteering.

However, sugar millers believe that the situation was very much expected because of low rollover stock and lower production of sugar in the country. The shortfall was expected and the government functionaries, too, were aware of it, one mill owner told Dawn. He said production of sugar nearing consumption level with just 500,000 tonnes of the rollover stock set the stage for speculation and rise in the prices.

It was the government’s responsibility to immediately take a decision and slap a ban on sugar export, which was not done in a timely manner.

As the input cost of growers also increased, they also raised cane price that ranged between Rs225 and Rs270 per 40 kg, while the government fixed the price at Rs190. In this situation, the sugar price increase was not just due to the cartels, as it involved all stakeholders including middlemen.

To overcome the price hike issue, the PM held a series of meetings with the relevant officials and chief secretaries of the provinces to ensure that all administrative steps were taken to check hoarding and profiteering. The premier believed that the price hike was mainly because of hoarders and profiteers while the production and stock position showed some other story.

On his instructions, the sources said, the provincial chief secretaries were directed to take steps for controlling hoarding and profiteering in their respective areas. Despite administrative actions by the government machinery, the prices continued to show upward trend.

To complement administrative action in checking price increase of sugar and in order to provide relief to the masses, the PM on Friday also advised the provincial governments for implementation of Price Control and Prevention of Profiteering and Hoarding Act at sub-national level.

Published in Dawn, February 8th, 2020