LAHORE: The government will have no other option but to further raise sugar prices at Utility Stores in order to narrow the gap with the open market, to cope with the impending sugar crisis.
Industry sources believe that the available stocks will last till September. Unless at least 350,000 tonnes of sugar is available by then the worst-ever crisis will hit the country in October, according to them.
The government has already raised the sugar price at utility stores by Rs10 per kilogramme (kg) that has brought the price to Rs55. In open market, sugar is being sold for between Rs68-74 per kg.
The sugar stocks in the country will completely dry up by October 2010 and the price of the commodity will increase sharply, people associated with the industry told The Express Tribune. If the government decides to import sugar, the price is likely to touch Rs85 per kg. But even if the orders are placed now sugar will not be delivered until November 2010; whereas the available stocks will end by October – still leaving a month during which the Trading Corporation of Pakistan (TCP) will have no buffer stocks to deal with the situation.
The government would require three to four months for getting sugar from the international market since it can not import sugar from neighbouring countries like India, where it is already a precious item. For example, if the government were to order sugar from Brazil, it would take at least 110 days for the order to be delivered.
Presently, the price of sugar in the international market is $750-800 per tonnes. If the freight charges and landing cost are included, the price in rupees will come to Rs70-Rs75 per kg. Adding the sales tax and local transportation the price can go up to Rs 80-Rs85.
Currently, the sugar mills have a stock of around 600,000 tonnes and the TCP has less than 150,000 tonnes of sugar. Even if the resources are pooled, the total stock available would come to 750,000 tonnes. The monthly consumption is more than 300,000 tonnes increasing in the month of Ramzan to 400,000 due to the high use of beverages and sweets.
The Pakistan Sugar Mills Association (PSMA) chairman, Iskander M Khan, said that the PSMA was ready to cooperate with the government. He said the millers were ready to assure the government that the prices will remain in-control in Ramzan and that there would be no increase. However, the government should investigate which elements stopped the import of sugar, he added.
On the other hand, the Punjab government has no plans about how to deal with the upcoming crisis. Chief Minister Shahbaz Sharif has announced that sugar prices won’t go up in Ramzan but his team is not ready with an enforcement mechanism. Punjab government spokesman Pervaiz Rasheed while talking to The Express Tribune said, “We have asked the federal government time and again to import sugar at zero per cent duty.” When asked how the provincial government planned to face the crisis, he said, “I will talk to the food minister about it,” he added.
The sugar prices witnessed a sharp increase in the last quarter of 2009, when the price almost doubled from Rs38 to Rs76 per kg.
Published in The Express Tribune, July 28th, 2010.
Another Op-Ed on the same issue from Daily Aajkal by Aamir Husaini