Just when one thought the bitter sugar crisis was over, Pakistan Sugar Mills Association (PSMA) came out in the open, inviting a fresh debate en masse. This time around it is the massive fall in international sugar prices that has sent panic vibes amongst the millers, asking the government to impose 35 percent duty on imported sugar.
Time and again, the sugar millers based their arguments of higher domestic prices on robust international sugar price - emphasizing that things cannot be seen on a stand-alone basis.
But the last two months have forced the millers to rethink their stance of drawing comparisons with the international commodity prices, as sugar prices have fallen drastically from $769/ton in February to $486/ton this week.
The expensive price of sugar in international market in the past had provided a cushion to the local millers, enabling them to charge much higher prices from the end consumer, given the unviable price of imported sugar.
But now, nature has blessed the countrymen to be able to purchase sugar at much cheaper rates if imports are allowed.
Simple mathematics reveals that sugar imports at current international rate would cost around Rs43-45/kg depending on the origin of imports. The sweetener is currently available at much higher rates varying from Rs62/kg to Rs70/kg in the retail market.
Allowing commercial imports would naturally force local millers to cut down their prices to compete with the imported sugar - which is why they are demanding the government to impose a heavy import duty.
However, the argument of shielding local millers form cheap imports lacks justification, as in the times of relatively higher international sugar prices they had exploited the situation with industry profits quadrupling during the last quarter of FY09.
Another argument touted by PSMA is that allowing the imports would result in losses to the millers who in turn would not be able to pay back the growers.
The representative association of sugar cane growers, however, does not seem to buy this reason, as they believe that most of the farmers have already received their dues and it is just one of PSMAs tricks to play foul using the name of the growers.
The association also negates PSMAs views that the millers bought the cane at an average rate of Rs200/maund, deeming it an exaggerated rate. Even if the millers did procure cane at such high rates as claimed by PSMA, it does not provide justification to disallow imports or impose such heavy import duties.
PSMAs plea goes against the very nature of the free market mechanism, which carries risks as well. No business in a competitive market comes risk-free. Surely, it would not be an easy task for the PSMA to get the verdict in their favour as certain associations are preparing to appeal in the Supreme Court if the duty is imposed.
The consumers may want to delay their sugar purchases for a while and wait for the imports to arrive. However, there are fears whether the strong lobby of about 78 millers would give this up easily - especially when the Competition Commission is not around.
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