Another scam in the making?

Are the sugar mills building up pressure to export their way into another crisis?

Sugar mills are pressing the government to allow them to export a notional surplus, and thus cause a future shortage. Before the government gives in, it will have to consider whether it wants another staple shortage on its hands, like the recent wheat crisis, when permission to import allowed the prices to free-fall as the new crop arrived on the market. There are claims being made by the sugar mills that the exporters need to pay off the farmers for their cane. The Commerce Ministry disputes the figure of Rs 40 billion put forward by the Pakistan Sugar Mills Association as due to growers, instead claiming that most payments have been made. The PSMA plea is that it be allowed to export the surplus, which it claims is 1.5 million tons. Instead, it is claimed by the Ministry that the gap between stocks in hand and expected demand is 550,000 tons, which should be retained as a buffer stock.

Therefore, the sugar industry wants to export about a million tons of sugar which should be applied to meeting domestic demand. At the moment, there are offers of $600 per ton from Afghanistan, which translates to Rs 166 per kg, and a sale price of Rs 196 per kg if GST of 30 percent is factored in. This is a far cry from the Rs 140 per kg which the government wants as the local price for the rest of the year. If the government was to permit exports, the rate the government wants will be impossible to maintain, and the mills will hold back stocks until prices go up. This may seem easy enough to say, but it will be a messy and angst-ridden process, which will do nothing but bring obloquy on the government.

Sugar is a touch-button issue. The PTI government foundered on it, with exports at the wrong time causing prices to rise. There was also a problem caused by the untimely export of wheat. Those who profited them are once again in the present government. It is expected that the PML(N) will be business-friendly, but that should not mean caving in at the expense of the consumer.

The Editorial Department of Pakistan Today can be contacted at: [email protected].


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