In 2002, Pakistan joined the ranks of the world's
major sugar exporters, thanks to good monsoon rains despite following
severe and a prolonged drought. But Pakistan's sugar growers still
looking for prospect in selling their crop in a glutted market where
prices are falling steeply. The squeeze on prices paid to sugar
farmers has increased trade frictions, and prompted emergency support
from the government.
Many sugar producing countries, including Pakistan,
have taken steps to protect their sugar-growing farmers from
Pakistan slapped a 25% tax on sugar imports in June
after refiners and grower complained that imports of refined sugar
were about $100 cheaper per tonne than locally grown refined sugar.
Brazil and Australia have joined forces to file a
complaint with the World Trade Organisation about EU sugar subsidies.
But a converse situation emerged in 2004 when
domestic sugar output dropped because of the water shortage, which
slashed the sugarcane crop to 47.3 million tonnes this season,
compared with 52 million tonnes in the previous one. Country's annual
sugar consumption is around 3.6 million tonnes and the government
abolished a 6.0 percent withholding tax on imported sugar to cover the
domestic shortfall and hold prices in check in addition to waive
Pakistani sugar importers booked shipments just to
cool down the market. And the sugar stocks reached to about 500,000
tonnes. The sufficient supplies from international market suggested
that Pakistan may not have to look for many more imported sugar
cargoes as recent purchases to make the domestic supply situation
There was no big shortage in the market after the
purchases indicating Pakistan's comfortable domestic sugar supply
Prices shot up to round 28 rupees a kg, against 21
rupees a couple of months ago. Traders expect the market to ease when
the bulk of the imported sugar starts arriving.
A Finance Ministry official said that Pakistani
importers had booked 380,000 tonnes of sugar since January, when the
government scrapped a 25-percent import duty in a bid to check runaway
domestic prices. Every body was expecting that the market should soon
stabilise but the efforts go in vain. The federal government asked the
Trading Corporation of Pakistan, which had bought a buffer, stock and
provided it to state-owned chain of Utility Stores to sell on Rs25 per
kg. It did not work too.
There came an unprecedented observation when
Economic Coordination Committee of the Cabinet (ECC) in its last
meeting pointed out existence of a sugar cartel in the industry. The
sugar cartel is out to hit the poverty-stricken masses, already
howling under the heavy burden of prices, ECC said.
"The sugar price of Rs26-28 per kilogram is
unrealistic. It is the cartel price," Dr Ashfaque Hasan Khan,
Economic Adviser to the Ministry of Finance announced after the ECC
meeting chaired by Prime Minister Shaukat Aziz.
The government's abortive attempts to check food
prices had already resulted in the 10.25 percent inflation in March.
People are intrigued that as to what compelled ECC
make announce the existence of the cartel. It was, however, being
tipped out by some quarters that ECC may have taken action at some
ministers in the existing cabinet, who owned sugar mills. They also
doubt that with many sugar mills belonging to the ruling elite, who
would take action against the cartel?
Ashfaque, who has been asked to submit a report in
the next ECC meeting, was reluctant to say that he would recommend
punitive measures against the culprits, or whether he would like to
recommend the case to the so-far toothless Monopoly Control Authority
(MCA). "It is up to the ECC to take a decision," he
The country has enough sugar stocks of two million
tonnes. The Trading Corporation of Pakistan (TCP) is holding another
360 thousand tonnes in its stockrooms. Then the decision to allow
refined sugar imports has resulted in new orders for 212 thousand
tonnes till April 16, 2005. It is a lot of sugar given to the market
size. However, there are still supply constraints, putting pressures
on the prices, like it happened in case of wheat, flour and other food
items in recent months. Ashfaque, however, maintained that Sensitive
Price Indicator (SPI) has shown a marginal 0.07 percent downward trend
during the week ending April 21, 2005, which he attributed to the
arrival of fresh wheat crop.
The Cabinet Committee has also decided to import
250 thousand tonnes of Urea for Kharif crop, as the existing market
demand of 2.43 million tonnes is higher than the domestic production
of 2.27 million tonnes. On the other side, Pakistan Sugar Mills
Association (PSMA) has denied existence of any such cartel in the
country. It further said that Pakistan has been turned into a dumping
ground for European sugar due to the government's policy of zero-rated
unlimited quantities of sugar import into the country. The PSMA
spokesman said the European Union, on the other hand, has imposed
anti-dumping duty on Pakistani textile products besides withdrawing
GSP facilities and the European authorities have paid no heed to even
the repeated requests from President General Pervez Musharraf and
other senior government representatives.