PSMA Punjab enumerates reasons behind steep rise in sugar prices

LAHORE: Dispelling the impression that sugar prices are increasing in the domestic market due to shortage, Pakistan Sugar Mills Association (PSMA) Punjab Zone termed it far from the reality and said that increase is the result of smuggling due to unpredictable high dollar exchange rate, rise in POL prices, extremely high bank interest rates, increase in wages and sky rocketing prices of electricity.

The PSMA Punjab Zone spokesman in a statement on Thursday said an objective analysis of the figures would reveal that at the end of last sugar season 2021-22, Pakistan had a surplus of about 10 lac tons of sugar.

Due to this huge surplus, the government had allowed 2.5 lac tons of sugar for export with the consideration to allow another 2.5 lac tons export subsequently. It was also estimated that the sugar season 2022-23 will be good for sugar production. But during the sugar season, it was realized that the crop yield was not in accordance with the estimates and expectations, therefore further export of sugar was stopped by the government.

Pakistan at the outset of the sugar season 2022-23 had stocks of 8.15 million tons including carryover stocks of last year, which was a satisfactory stock position for the entire year with some surplus.

The Federal Board of Revenue and other concerned government institutions still maintain that our monthly consumption is 0.65 million tons. During November 2022 to July 2023, the consumption was 5.85 million tons for 9 months. For rest of the three months, Pakistan will need 1.95 million tons, whereas stocks availability in Pakistan is 2.3 million tons. The impression of shortage of sugar at this point of time is not understood.

As far as price of sugar is concerned, international sugar market is highly volatile and up to Rs250 per kg. Therefore, there is lot of leakage from Pakistan borders. Pakistani sugar, being very popular due to its high quality and low domestic prices, encourage big leakages through western borders.

The other important phenomenon for price rise in domestic market is due to unpredictable high dollar exchange rate, rise in POL prices, extremely high bank interest rates, increase in wages, ever rising market prices of all other commodities and sky rocketing prices of electricity. All these factors make sugar no exception under these adverse market situations, the spokesman added.

It is important to note that for the upcoming sugar season 2023-2024, estimates show there is likely a shortage of sugar production versus consumption due to decrease in sugarcane area in entire Pakistan. For this, the government needs to strategize to make up the deficiency well before time. It is also important to protect our borders to avoid leakages of sugar, the PSMA suggested.

The federal and provincial governments need to plan in a way that the highly regulated sugar sector should be set free to work on market forces like rice, maize and other crops to make it competitive internationally. It is also not being realized that 70% of our total sugar is consumed by commercial sector. Only 30% sugar is consumed by the domestic consumer, out of which 15% segment of society is poor.

The government is concerned with this segment of society, and there are already special discounted arrangements like utility stores and more arrangements could be made like that to take care of them. “If this over regulation persists, it will result in further reduction of sugarcane plantation and the government will have to spend billions of dollars to make up the deficiency of domestic sugar production,” the spokesman concluded.

Copyright Business Recorder, 2023