Grave policy gaps in sugar sector

Business Recorder

3 days ago

EDITORIAL: The Trading Corporation of Pakistan's (TCP) July 15 directive to slash its sugar import tender from 300,000 to just 50,000 metric tonnes is the latest twist in a saga that has completely exposed the confusion, lack of foresight and planning, and utter incompetence that has defined the government's handling of sugar export and import decisions in recent months.
More tellingly, it reveals a policy regime designed to reward rent-seeking behaviour rather than protecting the public interest and market stability.
As previously detailed in this space, the government, acting under the considerable, and dare one say, pernicious influence of powerful sugar barons, many of whom hold prominent positions within the political mileu, approved the export of roughly 765,000 metric tonnes of sugar during the last fiscal year.
The decision was ostensibly based on assurances that only surplus stocks would be exported, ensuring that domestic prices would remain stable. However, what ensued was a shortage of sugar domestically and a sharp price surge, solely benefitting trade. To rein in soaring domestic prices, the government recently decided to allow the tax-concessions on import of sugar.
The timing of the import decision, however, highlights a serious lack of planning and coordination among key stakeholders. By the time imported sugar enters the Pakistani market, the local crushing season will be in full swing, risking disruption to the domestic crop's market.
Even more critically, importing such large quantities raises questions regarding the pressures that will be brought to bear on our precarious foreign exchange reserves.
And given the tax waivers on these imports – wherein the FBR has exempted these from customs duty and reduced the sales tax rate from 18 percent to 0.25 percent – not only is this going to seriously burden the national exchequer, the country will also risk violating the $7 billion IMF programme that mandates it to not grant preferential tax treatments or engage in commodity purchases.
While the IMF has made no official comment, there are reports of it privately taking strong exception to the government's haphazard moves that deviate from agreed reforms. It is this pressure, ostensibly, that compelled the TCP to considerably scale back its sugar import tender.
The exorbitant prices Pakistani consumers have been forced to pay for sugar reveal not only the folly of the ill-conceived decision to export the commodity in the first place, it also points to deeper, systemic issues related to rampant price manipulation, hoarding, the entrenched political clout of sugar barons, their cartel-like behaviour and the collapse of regulatory oversight.
Over the last seven months, there has been a consistent rise in prices of the commodity from Rs140 per kg to around Rs210 per kg even as its international price at current exchange rate levels hovers around the Rs104 per kg mark. Now, despite the government reaching an agreement with mill owners that fixed the wholesale price at Rs165 per kg, media reports indicate that many wholesale outlets have openly defied the agreement, demanding prices far beyond the official rate.
As a result, consumers continue to face inflated retail prices that bear little relation to the official ex-factory cost. This encapsulates all that is wrong with the regime governing the trade of agricultural commodities: toothless oversight mechanisms, unchecked power and impunity of entrenched agro-industrial lobbies, and the complete marginalisation of the public interest.
It must be noted that sugar is not a staple crop nor does it have substantive strategic value. Given this, it is unacceptable that successive governments have essentially subsidised its growth at the cost of more vital commodities. The government must put an end to the mollycoddling of the sugar sector and enforce discipline and transparency in its regulation.
Copyright Business Recorder, 2025