Sugar to sell at Rs130/kg during Ramzan

Members of the Pakistan Sugar Mills Association (PSMA) have decided to supply sugar to customers at a subsidized rate of just 130 rupees per kg throughout Ramzan. As per reports, this sugar will be available to the general public at specific sale points across Pakistan.

The sugar industry has pledged to aid federal and municipal authorities in ensuring economical sugar prices for the public during the holy month of Ramzan. According to a spokesperson from PSMA, sugar prices are determined by market forces such as supply and demand. However, a handful of speculators spread false information to distort the market and artificially inflate prices for personal monetary gain.

This practice causes financial harm to consumers, farmers and the wider economy. In many cases, sugar is not a final good, as other industries use the commodity as an input in their production processes. The confectionery industry can serve as an example of this phenomenon, and it faces rising input costs when sugar suppliers manipulate the prices, causing profit margins to drop considerably.

For the aforementioned reasons, PSMA has implored the government to take stringent action against such individuals or entities. If authorities can successfully crack down on such activities, the sugar market might be stabilised.

Sugar exports have been prohibited by authorities during the ongoing crushing season, which has resulted in local sugar prices dropping compared to last year’s prices when sugar exports were uninhibited. According to reports, industrialists claim that domestic sugar manufacturers produce some of the cheapest sugar in the international market despite a multitude of factors working against them.

These factors are reportedly extortionate taxation rates, high production costs and low sugar recovery rates. Despite the odds stacked against domestic producers, the cost of imported sugar exceeds 200 rupees per kg.

The reason behind Pakistan’s ‘competitive’ prices is supply-side issues facing the world's top sugar industries. For instance, Brazil, one of the leading exporters of commodities, is experiencing crop shortages. Similarly, sugar crop yields in India also face issues.

Given the global developments surrounding sugar production, it might have been beneficial for Pakistan to export the commodity instead. While the restrictions on sugar exports could be chalked up as a missed opportunity for cash-strapped Pakistan, exports would have undoubtedly caused prices to rise during Ramzan.

Sugarcane manufacturers have witnessed sugarcane prices rise beyond last year’s Minimum Support Price (MSP) to a staggering 600 rupees per maund. Coupling increasing prices with the high interest rates which mills have to face has resulted in an explosion in the cost of sugar.