Sugar auctions: another futile exercise

Latest in the series of the sugar industrys happenings is the auction of 50,000 tons of sugar by the Trading Corporation Pakistan (TCP).
Ever since the decision to purchase sugar from the international market had been made, the fate of the imported sugar for Pakistan seemed almost cursed as was obvious from the several unwarranted import delays.
TCP was restrained by bureaucratic delays and due diligence requirements from the Public Procurement Regulatory Authority. Later, tenders awarded to incompetent international companies were scrapped, following which the TCP complained that it was restrained by the availability of funds.
While all this brought with it unwarranted delays, another hitch was delivering the imported sugar to consumers. Provinces had been allotted 100,000 tons of sugar at Rs56 per kg to be dispatched in the open market, but they procured only 44 percent of that. The Utility Stores Corporation also raised its prices as overall market prices spiraled.
All the delay, inefficiencies of provinces, exploitation on the part of hoarders, rising international sugar prices, and the final blow of the floods, made both locally produced and imported commodity dearer too.
For the unfortunate consumers, sugar remained out of reach, both literally and financially.
Now the TCP, upon instructions from the Economic Coordination Committee has auctioned 50,000 tons of imported sugar in the local market. Half of that quantity was auctioned in the last week of September, while another 24,800 tons was tendered for auction on past Wednesday.
In 2008, the TCP had first experimented with sugar sales of 10,000 tons directly in the open market, but the commodity was mainly bought up by hoarders, thus rendering the process largely futile.
But the TCP has tried playing smart this time around - allowing tenders for 50-500 tons of sugar only to encourage retailers and wholesalers to participate, rather than self-seeking stakehoarders, oops, stakeholders.
The devil, however, still sits on the prices, which are quite high. Since international sugar prices have been on a northward journey, standing at $625.6 per ton on Thursday, the landed cost of sugar is quite high.
The average price of the tenders awarded was around Rs 61,300 per ton, which, combined with an 8 percent sales tax and wholesalers margin will set the wholesale benchmark between Rs 70-75 per kg, or maybe even more. It seems consumers will still be paying a hefty price despite the auction.
And as for the prevention of hoarding, the range of quantity between 50-500 tons for tenders is quite wide. We
e talking tons over here and not kilograms, but that might have skipped TCPs rationale.
A 500-ton tender bought at around Rs 61,300 per ton, and sold for Rs 75 per kg will give the purchaser a gain of nearly Rs7 million! Not a petty amount, one must say, and also enough to lure any hoarder.
While this was a step in the right direction by the TCP, it had put on an ill-sized shoe while taking this step. Price benefits to consumers will be near to nil and the risk of hoarding still abides - this is more a different, more creative way to help the rent-seekers pocket than anything else.