To allow sugar exports

After much wait, the Commerce Ministry last week recommended an export of 0.2 million tonnes of sugar, as against the proposed 0.5 million tonnes – a disappointing move in light of the available surplus. At a time of widening current account deficit and dwindling exports, Pakistan could use all the exports it can get, including sugar.

In its decision of December 28, 2016, the ECC had allowed export of 225,000 MT of sugar up until March 31, 2017, this time without any subsidy as the international prices were attractive. The ‘permission’ to export has been subject to the condition that the domestic price of sugar does not increase by more than three percent. The sugar stock/export situation has also been under tight review.

We are told that this kind of regulation exists for the purpose of food security and ensuring affordability. After all, exporting sugar means less sugar to go around here, driving the domestic price up. While this column is against profiteering, there are some points to ponder about the current scenario. First and foremost, the provincial governments have all fixed the price of sugarcane at exorbitant levels, which makes sugar expensive from the get go. If affordability is the motive, perhaps a revision of the cane pricing is warranted. Although this regulation exists to protect growers, many sugar mills end up with surplus stock with nowhere to export and are unable to make payments.

Secondly, sugar is a non-essential item. Unlike wheat, it is not a staple food and its consumption is not as big. In a previous interview with BR Research, then Chairman PSMA said that of the total domestic sugar demand, 70-75 percent is from the industry i.e. mithai, cold drinks, biscuits, etc. He added that “given domestic consumption patterns, a Rs35 per kg drop in the price of sugar (60%) would result in the average person saving just Rs200 a year. That’s nothing.”

Finally, there’s the math: the current season’s production is estimated at 6.21 million tonnes in addition to carryover of 0.95 million tonnes, equaling a total of 7.16 million tonnes. Given that Pakistan’s domestic consumption is 5.52 million tonnes, there are 1.64 million tonnes of surplus. Subtract the strategic reserve of six weeks (0.63 million tonnes), as well as the previous quota of 0.225 million tonnes, and the available surplus stock for export is around 0.785 million tonnes. This easily allows more than 0.2 million tonnes to be exported.