Pakistan Sugar Crisis: A Farce?

Photo Courtesy- Chowrangi.com- Original Photo By Jang Cartoonist

The ritual price hike before Ramadan starts, is quite normal and expected. Every year a massive price hike is seen in food items and various goods just before the start of Ramadan. Quite interestingly, this is justified as a ‘business tactic’ to get maximum profit at the time people are bound to store in food items. Ironic but true. However, the recent price hike in ‘sugar’ prices has been termed as a ‘Sugar Crisis’ by Pakistani Authorities and media outlets.  If inquired regarding the sudden increase in prices the local stores point fingers at the lack of supply and an increase wholesale rate, which is then directly affecting the retail market. So how does one figure out the sugar imbroglio? A significant raise in prices -up to Rs.20- just before the peak consumption time seems absurdly convenient.  While we are busy, speculating lets also look at the economic side and try to deduce some logic.

Photo Courtesy: Aaj TV

Just last week the sugar prices hiked to an all time high of about Rs.65/kg .According to a dawn report: The government raised the price of sugar abruptly from Rs.38 to Rs.50 on the plea that the sugar price in the international market was high. It was also announced that if imported from Dubai the sugar would cost the public Rs65/kg. The increase of Rs12 per kg in the price of sugar is considered as the most unpopular decision of the federal government.

According to reports earlier this year: Pakistan was all set to import 200,000 metric tons of sugar to overcome the shortfall.

The sugar price had swelled to Rs.44 per kg in the open market with dealers predicting that it would surge to Rs.50 per kg during the next couple of weeks. Sugar dealers blamed the mills owners for creating artificial shortage of sugar in a bid to push the prices upward. The Nation reported that the import of 200,000 tons of sugar matter was likely to be approved in a meeting of the Economic Coordination Committee (ECC) that took place later in the month.

The farmers have reportedly blamed the mill owners of not providing adequate payments. Records state that the payments to the growers were delayed for more than eight to ten months. This discouraged farmers from sowing sugar cane and opt for growing wheat instead to avail attractive incentives. Now comes time for manipulations by the mill owners. Not only are the mill owners accused of delaying payments causing a decrease in supply of about 15 to 20 percent as compared to last year, they have also hoarded large amounts of supplies. These supplies have been hoarded (conveniently) in order to create an artificial shortage in the market. The shortage then allows them to release stock as they wish with prices that give them maximum profit. A man made crisis, which in fact is a monopoly to earn maximum profit during peak consumption. Withholding supplies and increasing prices for maximum profit has become a popular tactic. Previously during the wheat crisis reports of withholding stocks kept surfacing.

The fact that the issue is not new puts the blame falls entirely on the incompetence of the Government. The lack of strategy to keep track of rising prices .The failure of the Government to tackle the delayed payments and hence less growth of sugar cane issue is to be blamed as well. Despite the clear lack of strategy, the authorities seem to be more interested in playing the blame game, instead of focusing on the problems. The Punjab Government was the first to react after government announced an increase sugar price, accusing the federal Government of not consulting the provincial Government on the matter. Also announcing that the provincial government is determined to sell sugar at Rs.40 in Punjab.

The Punjab Chief Minister Shahbaz Sharif appealed to the federal government to relax sales tax and excise duty on sugar, also accusing Federal Minister for Production Mian Manzur Ahmad Watto for unilaterally deciding to raise the price of sugar without consulting Punjab Government. While Mr.Watoo blames the Sharif’s for hoarding sugar supplies, while talking to the news he said “The Brother Sugar Mills owned by PML-N Quaid Nawaz Sharif and his family, has a stock of 10,000 tonnes, while the third mills is the Kashmir Sugar Mills with a stock of 5,000 tonnes,” .

Despite charges, hurled against the Sharif brothers a meeting on the said issue took place just yesterday. Chief Minister Punjab Shahbaz Sharif chaired the meeting with Pakistan Sugar Mills Association Punjab. According to reports:

Chief Minister, Muhammad Shahbaz Sharif has said that we are thankful to Prime Minister of Pakistan for approving the proposal of Muslim League-N for fixing ex-mill price of sugar at Rs.45 per kg. (..). He said that when the Federal Minister for Industries and Production announced unilaterally ex-mill price of sugar at Rs.49.75 per kg, this decision was not acceptable to us in the larger interest of the common man. He asked the mill owners present in the meeting to accept this decision wholeheartedly and that the decision was being taken in the larger interest of the people who are the real owner of Pakistan.

Shahbaz Sharif also announced the removal of police force from the mills but warned said that government the process of supervision for keeping a vigilant eye on sugar prices will continue. The Punjab Government expects the mill owners to insure unhindered supply. Later announcing that sugar would be sold at Rs.40 per kg in Ramadan Bazaars. The Chairman Pakistan Sugar Mills Association Punjab, Javed Kiyani is reported to have assured to fully implement decisions made with the Punjab government, ensuring the provision of sugar at fixed prices and low prices and removing hindrance on supply.

This comes as a strong move from the Punjab Government but its effectiveness is yet to be determined. Whether these announcements will yield fruitful results is yet to be seen. Nevertheless, the presence of such crisis point fingers at Governments incompetence in tackling mismanagements, excessive profiteering and man made crisis.