RETAIL sugar prices, officially fixed at Rs90, have been surging across the country almost on a daily basis. Media reports say the cost of sugar has spiked by over 50pc in the last fortnight; the sweetener is now being sold for up to Rs160 a kilo in most cities. This belies official claims that we have enough reserves to meet demand for the next three weeks. So what is happening? To begin with, the government has made a mess of the sugar trade. Its selective use of the district administration, police and anti-corruption agencies against producers and dealers for the last two years hasn’t worked. Instead, we have seen sugar prices rise swiftly and consistently. The focus on accountability has diverted the authorities from their task of regulating the supply chain to aiding what the industry describes as a witch-hunt.
For example, a report by the auditor general of Pakistan on factors leading to increased sugar prices shows that the Punjab cane commissioner’s office failed to assist producers procure cane at the officially fixed rate of Rs200 per 40kg. When mills paid an average rate of Rs260 per 40kg during the last harvest, it was only natural for them to raise their prices. The sucrose content of 7.5pc was far less than the 10.4pc fixed by the commissioner because of the early commencement of crushing, which resulted in significant output loss at the end of the harvest. The cane commissioner’s office, says the report, failed to anticipate sugar production or suggest remedial actions (imports) to cover the expected shortages. Officials are now blaming court orders for restraining them from forcibly lifting stocks from the mills to fill the supply gap and keep millers and speculators from manipulating the market. The delay in the start of the new harvest in Sindh is also being cited as a reason for the instability in the sugar market. Prices are essentially a demand-and-supply phenomenon and cannot be controlled by force alone. The government’s job is to give a fair estimate of domestic output and, in case of expected shortages, import the commodity in time. Even before that it needs to reform the entire supply chain and document it for effective regulation. To people struggling with inflation it doesn’t matter whether sugar prices are rising because of market manipulation or some other factor. They know that it is the government’s job to ensure the easy availability of essential food items at affordable rates.
Published in Dawn, November 6th, 2021