Sugar bites

It seems like the month of Ramazan will come to pass without major surprises this year as far as sugar prices are concerned. There haven been any significant jumps in sugar prices across the country in recent weeks; however that does not mean prices are stable or have come down a notch. In fact, they have continued their gradual northwards journey since the crushing season ended in March this year. According to industry sources, sugars ex-mill price has gone up by Rs9 per kg since the announcement of the FY12 budget, despite availability of ample stocks, keeping retail prices under pressure. Wholesalers usually add upto Rs1 per kg to the ex-mill price, while retailers add Rs3 to Rs4 per kg to the wholesale price. Thus, any change in the ex-mill price moves the wholesale price as well as retail price. Currently, a higher ex-mill price in Sindh - averaging Rs72 per kg - has pushed retail prices in the province higher near Rs75-76 per kg, while sugar is being sold at as high as Rs80 per kg in certain areas in Karachi. The Sindh government did not fix the ex-mill price for Ramazan and neither has it been able to control the retail price as it is evident that retailers are setting their own rates, bringing no respite to consumers. Making matters worse was a brief disruption in supply from some 14 sugar mills in districts Badin and Tando Mohammad Khan due to recent floods there. While the federal government wasn willing to procure sugar at an ex-mill price of Rs64 per kg, the provincial government in Punjab purchased sugar at Rs65 per kg for the month of Ramazan from the sugar mills in Punjab. The ex-mill price is averaging Rs73 per kg and sugar is being sold at multiple rates in various districts across the province. The Punjab government is also selling sugar at Rs68 per kg in Bachat Bazars, while Utility Stores Corporation outlets are offering sugar at a subsidised rate of Rs55 per kg. However, the hassle, inconvenience and quality of the subsidised commodity often irritates consumers. The sugar industry, including its association Pakistan Sugar Mills Association (PSMA), is confident that sugar stocks are adequate for domestic needs until next crushing season starts November-end. If that is so, why have sugar prices been rising across the country since the last crushing season ended in March 2011? The industrys claims that market forces are driving up sugar prices seem to be a farce in this case. Some industry sources say that market forces of supply and demand will be able to discover the right price if the sugarcane prices are linked with the sucrose recovery levels of the crop. Moreover, to achieve more transparency in the industry, payments among the industry players must be made through a banking instrument (e.g. cheque). Whether market forces will take over in essence, remains to be seen. Till then, sugar will continue to bite, despite all its sweetness!