Economists blame lax regulation, call for reforms to resolve Pakistan's recurring sugar crisis

Arab News

2 days ago

ISLAMABAD: Pakistani economists on Thursday blamed weak enforcement of regulations by the government and lack of transparency for the recurring sugar crisis in the country, stressing the urgent need for reforms in the sugar industry to resolve the problem.
In Pakistan, high sugar prices have often triggered public outcry and become flashpoints for opposition criticism, with recurring allegations of hoarding and cartelization, especially during election years or periods of economic volatility.
Sugar crisis has once again started to make headlines in Pakistan, with retailers and suppliers reporting that prices of the commodity have risen sharply to Rs200 [$0.71] per kilogram in many parts of the country. This development takes place despite the government's announcement earlier this month that it has capped sugar's retail price at Rs173 [$0.61] per kilogram.
'The sugar crisis is not new, it recurs every two to three years regardless of which party is in power, even under military regimes,' Dr. Kaiser Bengali, a leading economist, told Arab News.
'This pattern continues due to weak enforcement, lack of transparency in stock reporting and poor regulatory oversight at all levels.'
The economist said the crisis was caused primarily by a powerful cartel of sugar mill owners who manipulated prices by influencing both the federal and provincial governments' policy decisions.
Bengali explained that these sugar mill owners, many of whom were politically connected, created artificial shortages to drive up prices and maximize their profits.
'Each year, mill owners pressure the government to allow sugar exports, claiming they need to clear old stock to begin the crushing season,' Dr. Bengali said.
He said mill owners also demanded subsidies under the pretext of covering price differentials, only to later cause domestic shortages and raise sugar prices.
Pakistan's Food Security Minister Rana Tanveer Hussain refuted reports of a sugar shortage in the country, alleging that a perception was being created as if there were major issues regarding the availability, supply and pricing of sugar.
'The government launched a crackdown on hoarders and profiteers, including retailers and even mill owners, in an effort to curb market manipulation,' Hussain told Arab News after addressing a press briefing on the issue.
'We have also fined shopkeepers Rs180 million ($639,000) who were selling [sugar] at higher prices,' the minister said.
In a press statement released by his ministry, Hussain said Pakistan currently has 5.8 million metric tons of sugar from this year's production in stock and with the buffer stock of 500,000 metric tons, the total availability stands at 6.3 million metric tons. He said this is sufficient to meet the annual domestic consumption requirement, which is also around 6.3 million metric tons.
The statement said Pakistan exported 750,000 metric tons of surplus sugar last year, earning $402 million. The ministry said this export decision was not an 'abrupt' one but was taken after thorough verification of data from the Federal Board of Revenue (FBR) and other departments.
Responding to criticism over the government's export and import decisions, Hussain told Arab News said such narratives ignored a ten-year trend in Pakistan where sugar exports typically followed the crushing season and were sometimes followed by imports of the commodity.
He acknowledged that initial projections for the 2024–25 season estimated sugar production at 7 million metric tons, slightly above the previous year. However, the adverse effects of climate change affected agricultural output, including sugarcane yield.
'As a result, actual production dropped to 5.8 million metric tons,' he said.
'NO QUICK FIXES'
Pakistani business reporter Shehbaz Rana, who has extensively reported on the matter, said the control of sugar mills by politically powerful families was the major reason for the crisis.
'The only viable solution is full deregulation of the sugar supply chain, removing government controls over production, pricing, imports and exports to dismantle cartel structures and foster true market competition,' Rana said.
Economist Dr. Khaqan Najeeb, Pakistan's former finance adviser, said the sugar sector's crisis underscored the urgent need to move beyond 'reactive firefighting' and adopt structured, tech-driven, and market-aligned frameworks.
'Addressing this challenge requires deep policy expertise and a commitment to serious, evidence-based reform,,' he told Arab News.
He pointed out the need for six key sugar sector reforms: improving per-acre yields, promoting ethanol and bagasse power, deregulating the market, enforcing anti-cartel laws, using technology to monitor the supply chain, and setting transparent, formula-based pricing with timely farmer payments.
'These are not quick fixes — they demand consistent, hard work, but after years of misaligned interventions through poorly timed exports and imports, one thing is clear, there is no easy solution, only the hard path of structural reform,' he added.