18 August, 2008 - On 26 July, the Government of Pakistan imposed a ban on the export of sugar and removed the sugar import duty in an attempt to avert a potential sugar crisis in the next two to three months.
Syed Naveed Qamar, Federal Minster for Finance, Privatization and Investment, made the decision in the Daily Economic Monitoring Committee meeting to stabilize prices in the wake of increased domestic consumption. Sugar joins wheat and pulses as commodities currently under an export ban.
Sugar: Pakistan’s Second Agro Industry
Sugarcane, an important cash crop, is grown on over a million hectares and provides the raw material for Pakistan’s 78 sugar mills – comprising the country’s second largest agroindustry. Sugarcane production is cyclic as farmers and industry continue to work at odds. Industry procurement practices, such as delaying the crushing season, buying cane at less than the support price, short weight, false deductions and delayed payments, reduce returns to farmers. Sugar millers complain that farmers plant unapproved varieties with low sucrose content, thus resulting in lower sugar production.
Sugar Industry Linking Domestic Prices with Rising World Prices
According to market sources, as the international sugar price approaches $400 per ton, Pakistan’s sugar industry has increased the retail sugar price from Rs 25.5 per kg to Rs 35 per kg over the past several months. According to official sources, the Pakistan Sugar Mills Association (PSMA) has proposed that the GOP stabilize sugar prices at Rs 35 per kg, which they consider the threshold level. Sources note that the sugar industry expects Pakistan’s next sugar cane crop to decline by 10 percent.
Sufficient Sugar Stocks Available
Sugar stocks at present are reportedly around 1.8 million tons, sufficient to meet domestic requirements up to November 2008 -- the start of the next crushing season. However, the PSMA predicts that price pressure will continue beyond November due to the reduced area currently under cultivation.
GOP Trying to Avert Sugar Crisis
Despite the good stock position, domestic sugar prices continue to rise mainly due to manipulation of the market by the sugar industry and hoarding by traders amidst reports of reduced crop area. Pakistan is already in the grips of a severe food crisis with food inflation at an all-time high. Food shortages and price hikes are normally expected during the Holy Month of Ramadan, which this year falls in September. By imposing an export ban, Pakistan’s fragile government is attempting to ensure availability of sugar at affordable prices through Ramadan and beyond.