The sweetest subsidy: exporting Pakistan’s water as sugar

Pakistan’s debate over sugar exports is again being framed in familiar terms: surplus stocks, mill liquidity, payments to growers, foreign exchange earnings and the approaching crushing season. A federal steering committee has now agreed in principle to allow the export of another 200,000 tonnes of domestically produced sugar, subject to formal approval by the Economic Coordination Committee.

Missing from this discussion is the resource that makes the surplus possible: water.

Sugar is measured in tonnes and valued in rupees or dollars. But every tonne also represents water consumed in growing the cane from which it was produced. Once this is included, sugar exports look less like the disposal of an agricultural surplus and more like the transfer of a scarce natural resource at a price that does not reflect its depletion.

In an earlier discussion of Pakistan’s rice exports, I argued that the country was selling aquifer depletion at commodity prices, treating a stock as if it were a flow and natural capital as if it were income. Sugar presents a variation of the same problem. Rice is grown substantially for export. Sugarcane first receives inexpensive canal water and largely unregulated groundwater to sustain a protected domestic industry. When production exceeds domestic demand, the surplus is presented as an export opportunity.

In both cases, the water leaves Pakistan without appearing on the invoice.

A widely used international water-footprint assessment estimates the blue-water footprint of sugarcane in Pakistan at approximately 231 cubic metres per tonne of cane. Blue water is supplied from rivers, canals, reservoirs and aquifers, rather than rainfall. It is the scarce water over which farms, cities, industry and ecosystems must compete. The figure is a national benchmark based on historical production conditions, not a measurement of every farm, but it establishes the order of magnitude.

With sugar recovery of around 10 percent, producing one tonne of sugar requires roughly ten tonnes of cane. Exporting 200,000 tonnes of sugar would therefore represent about two million tonnes of cane and approximately 462 billion litres of blue water.

That is the water implication of only the latest proposed export permission.

The sugar industry has sought approval for considerably larger quantities, with recent requests in the range of 585,000 to 600,000 tonnes. An export of 585,000 tonnes would embody approximately 1.35 trillion litres of blue water. If permission eventually reached one million tonnes, the figure would rise to approximately 2.31 trillion litres.

These estimates do not imply that every litre came from groundwater or was permanently lost, since some irrigation returns through seepage and recharge. They do, however, reveal the resource scale missing from export policy. A water-stressed country is considering sugar exports without publishing any water account for the transaction.

Rahim Yar Khan shows what this hidden accounting looks like on the ground.

Once strongly associated with cotton, the district has undergone a substantial shift towards sugarcane. A peer-reviewed land-use study covering 1990 to 2023 estimated that sugarcane acreage increased by about 625 percent, while cotton acreage declined by approximately 27 percent. While cotton’s decline reflects several factors, including seed quality, pests and public policy, the expansion of sugarcane is unmistakable.

Six sugar mills operate in Rahim Yar Khan and another six across the provincial border in neighbouring Ghotki. The issue is not their ownership, but the sustained demand for water-intensive cane created by such concentrated crushing capacity.

That demand is ultimately a demand for water.

Recent reporting puts the number of irrigation tubewells in Rahim Yar Khan at approximately 97,500, with annual groundwater extraction estimated at about four million acre-feet. Groundwater monitoring data show that average depth to water increased from approximately 10 feet in 2004 to more than 20 feet in 2024, a deepening of about ten feet over two decades.

District averages conceal local differences. Rahim Yar Khan includes areas suffering from waterlogging and salinity as well as areas experiencing groundwater decline. Even so, the long-term movement warns that extraction and recharge are not in balance across important parts of the district.

The pressure extends far beyond one district. Pakistan’s Seventh Agricultural Census recorded 1.83 million tubewells and lift-pumps in 2024, nearly double the 2004 total, before accounting for installations added since the census.

Solar is now the largest recorded power-source category for tubewells. It lowers farmers’ energy costs and dependence on expensive diesel and unreliable electricity. But it also sharply reduces the marginal cost of pumping. Without abstraction controls, an otherwise sound energy transition can accelerate groundwater depletion.

Canal irrigation is similarly under-priced. Punjab’s flat-rate abiana amounts to only a few thousand rupees per acre, translating into a fraction of a rupee per cubic metre for a water-intensive crop. It neither reflects scarcity nor rewards conservation.

This is the hidden subsidy behind apparently cheap sugar.

Growers, mills and exporters pay for inputs, processing and freight. But no one pays the full cost of the declining aquifer, the opportunity cost of canal water or the agricultural production displaced when scarce water is committed to cane.

Pakistan is not producing cheap sugar. It is producing expensive sugar with nearly free water.

Recent experience should encourage caution. Sugar exports were followed by tightening domestic supplies, rising prices and imports. Some of that imported sugar is now being offered for export. The cycle exposes a policy system that alternates between surplus and shortage while leaving the underlying allocation of water unquestioned.

This does not mean that sugar exports must be prohibited in all circumstances. Once sugar has been produced and genuine excess stocks exist, limited and carefully monitored exports may be preferable to financial distress, delayed payments to growers or deteriorating stocks. But export approval should not be confused with proof that producing the surplus was economically rational.

Nor should the policy question be reduced to whether domestic stocks are sufficient. A country can have a surplus of sugar while running a deficit of water.

Four reforms are essential.

First, water must be measured. Major agricultural districts need credible public accounts of canal deliveries, groundwater abstraction, recharge, water-table movement and crop-level water use. Tubewell registration without reliable abstraction measurement will not be enough.

Second, water must be valued. This does not require imposing an unaffordable commercial tariff on small farmers overnight. It requires recognising water as an economic input, reforming flat acreage assessments, rewarding efficient irrigation and including groundwater depletion in crop and export decisions.

Third, agricultural incentives must reflect local water conditions. Cane cultivation in relatively water-abundant or poorly drained locations is not equivalent to cane cultivation in a declining groundwater zone. Support, procurement and milling policy should recognise hydrological limits instead of encouraging the same crop response everywhere.

Fourth, every proposed export of a water-intensive commodity should carry a water account, identifying the blue water consumed, the share likely drawn from stressed aquifers, the competing uses displaced and the unpriced depletion of natural capital excluded from the export calculation.

Without such an account, export earnings provide an incomplete and potentially misleading measure of economic benefit.

Every sack of exported sugar carries two invoices. One records the value of the sugar. The other records the water taken from Pakistan’s rivers, canals and aquifers. The first invoice is paid by the buyer. The second is being passed to the next generation.

Copyright Business Recorder, 2026