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Food supply

Sugar Price Fixation: Government and Mill Owners Reach Agreement in Pakistan

Strategic Insights

— 2 min read

The government of Pakistan, in collaboration with the Pakistan Sugar Mills Association, has agreed to fix the ex-mill sugar price at Rs165 per kilogram. This decision comes after weeks of public outcry over high sugar prices in the country, which were exacerbated by hoarding and manipulation by sugar cartels. The agreement aims to stabilize the domestic market and ensure the availability of sugar at the new price. However, this decision follows a tumultuous period, including a temporary suspension of import duties, a policy to grant blanket tax exemptions on sugar imports, and objections from the International Monetary Fund (IMF).

Key Takeaways:

  • The government and the Pakistan Sugar Mills Association have agreed to fix the ex-mill sugar price at Rs165 per kilogram.
  • The decision aims to stabilize the domestic market and ensure the availability of sugar at the new price.
  • The agreement follows weeks of public outcry over high sugar prices in the country, which were exacerbated by hoarding and manipulation by sugar cartels.
  • The government granted permission to export sugar to earn foreign exchange, but this move was later followed by a surge in sugar prices in the domestic market.
  • Former caretaker privatisation minister Fawad Hasan Fawad slammed the decision to import $300 million worth of sugar, calling it 'misguided' and demanding a policy rethink.
  • The IMF objected to the government's policy to grant blanket tax exemptions on sugar imports, indicating that it might distort the domestic market.
  • The Federal Board of Revenue (FBR) stopped sugar millers from lifting sugar for prices below Rs155 per kg to deduct taxes.
  • The FBR's SROs for granting tax exemptions on sugar imports were objected to by the IMF.
  • The government has allowed the import of 0.5 million tons of sugar by the Trading Corporation of Pakistan (TCP) or the private sector.
  • The Pakistan sugar sector crisis underscores the urgent need for deep policy expertise, a commitment to serious, evidence-based reform, and structural reform to address challenges in the sector.
  • Six core interventions are required to address the challenges in the sugar sector: boosting per-acre yields through targeted research and development, promoting diversification into ethanol and bagasse-based power, deregulating the market, enforcing anti-cartel laws, introducing tech-enabled supply chain monitoring, and establishing transparent, formula-based pricing linked to sucrose content with timely payments to farmers.

Statistics:

  • Ex-mill sugar price fixed at Rs165 per kilogram.
  • Sugar prices have witnessed an upsurge by Rs70 to Rs100 per kg in the domestic market.
  • Sugar prices in the retail market touched Rs200 per kg.
  • 0.5 million tons of sugar to be imported by the Trading Corporation of Pakistan (TCP) or the private sector.
  • $300 million worth of sugar to be imported by the government.
  • The government granted permission to export sugar to earn foreign exchange.
  • The prices of sugar started witnessing a surge in the domestic market after the government granted permission to export sugar.

Sources:

  • Ministry of National Food Security
  • The News
  • Pakistan Sugar Mills Association
  • International Monetary Fund (IMF)
  • Federal Board of Revenue (FBR)
  • Trading Corporation of Pakistan (TCP)
  • Former Advisor, Ministry of Finance, Dr Khaqan Najeeb

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