LAHORE: The already volatile sugar market has another time-ticking bomb under it as the crushing season is about to begin and growers from Punjab and Sindh will be selling sugarcane at different prices and distorting the national market.
Sindh has announced a rate of Rs425 per maund, whereas Punjab has fixed it at Rs400 for the same quantity. If the rate differential reflects in the market, the country would have two of them. If equalised officially, the Punjab millers will make additional money and be seen as begetters of political and fiscal favours — something the country can hardly afford.
The growers from Punjab have been arguing their case for Rs25 increase in cane price at every forum but have not succeeded so far.
Khalid Khokhar of Pakistan Kissan Ittehad, who has been leading the struggle of growers says: “It is a huge favour to millers and equally disfavour to farmers. In practice, it means Rs20,000 per acre loss to the growers if the average yield is taken at 800 maunds. If the growers have 100 acres, it is a loss of Rs2 million.”
“Can it be taken as a prudent policy? Of course not. Would not it have a political cost? Of course yes. Why cause this kind of loss to growers who lost money on almost all other crops? The provincial government needs to reflect on this decision and correct it for the sake of itself and the market consequences,” Mr Khalid asserted.
Muhammad Hussain, a trader from the city, has some deeper concerns: “Will both provincial governments ensure different prices for millers from Sindh and Punjab as they would have differing costs of production? If not, how would they justify it?”
“With the cane at Rs400, the sugar price should be around Rs123 per kg. In Sindh, it should come around Rs125 with Rs25 additional expense. Will it be maintained? Certainly not.”
The market equilibrium, he added, will not only be maintained but will be raised on the excuse of international prices, which are sure to maintain higher levels. Once again, smuggling would be an excuse and the price would shoot through the roof like this year.
“All efforts by the government failed to reign in millers failed this year and would fail next year as well as they would engage all officials and policy decisions in legal rigmarole and make money,” he deplored.
However, two different prices would only help make additional money. Otherwise, the governments — be it federal or provincials — would have no role in it.“
The millers are already demanding export permits to send half a million tonnes of sugar abroad, warns another trader. They did it in January and then sent the price skyrocketing. They have made over Rs50bn over and above officially fixed prices throughout the year. Now, when the new crushing season is about to begin, they want to export “surplus sugar” again. “If they had surplus sugar, which they are trying to prove now, why did prices go up — defeating the market logic,” wonders Mr Khokhar.
It is exactly the logic they presented and defended last January and made billions of rupees subsequently. Let’s see how the caretaker government behaves this time. If the rates favour for the Punjab millers is a yardstick, they seem to be winning for now, he regrets.
Published in Dawn, November 19th, 2023