Sugar exports have increased by nearly 6 times for the period July to November FY18 when compared to the same period last year, as per the latest SBP data. Given the change in the situation, from a ban on sugar export last year to an export subsidy this year, the rise in exports does not come as a surprise.
With Pakistan’s current account deficit, rise in exports are generally met with cheers; but in this case there are few winners beside the influential sugar millers. And even then the sugar millers clamour about their woes that include the notified rate being not viable, export subsidy payments not received as yet, and the federal excise duty of Rs6 per kg being unfairly high.
Additional to these problems are the problems faced by the textile sector. Incentivised sugarcane cultivation elbows out cotton production necessary for Pakistan’s key industry of textiles. (For more information read “Sugar thrives cotton dives” published by BR Research on 11 January 2018).However, since medium and small sized sugar growers are forced to sell their produced through middlemen at prices lower than the notified rate of Rs182 per 40 kg in Sindh and Rs180 per 40 kg in Punjab, they do not appear to be better off by preferring sugarcane to other cash crops.
While the mill owners and cane grower are at logger heads about sugar cane price, the provincial and federal governments are playing a blame game of their own. The federal government considers it the responsibility of the provincial government to ensure that the farmers get the fixed price, while the provincial government has blamed the federal government for creating the crisis in the first place.
Tussles between the provincial and the federal government and the sugar millers and cane growers underline the complete lack of cohesiveness within the country when it comes to policy making. Inefficient and non-transparent use of support prices and subsidies undermines what gains Pakistan receives from its rise in exports.
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