Did subsidies play any role to control sugar prices?

April 07, 2020

ISLAMABAD: Did the subsidies to sugar mills owners play any role to keep the sugar prices under control in the local market? The Inquiry Committee on sugar crisis data suggests that the prices...

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ISLAMABAD: Did the subsidies to sugar mills owners play any role to keep the sugar prices under control in the local market? The Inquiry Committee on sugar crisis data suggests that the prices remained low in PML-N government but during the PTI tenure, the prices went out of control despite the fact both governments paid subsidies to the mills owners.

During the PML-N tenure, 0.92 million metric ton sugar was exported in 2017 and 1.53 million metric ton sugar was sent abroad in 2018. Despite the huge quantity of export, the sugar prices decreased from Rs65.2 in January 2017 to Rs53.7 in June 2018. On the other hand, PTI government allowed export of 0.74 million metric ton sugar and the prices went up from Rs55.9 to Rs71.7 from January to December 2019.

The Inquiry Committee issued a supplementary report on the subsidies paid to sugar mills owners during last four years. According to the supplementary report, in 2016-17 and 2017-18, the government allowed sugar mills to export the sugar but there was no impact on the retail prices in local market. However, with the export of sugar in 2018-19, the prices went up from Rs55 to Rs74 from January to June 2019.

According to the report, the production of sugar in 2016-17 and 2017-18 was more than the estimated domestic consumption of the country, hence the sugar was exported from Pakistan. The estimated domestic consumption of Pakistan is around 5.2 million metric ton (MMT) per year. In the year 2016-17, Pakistan had a record 7.08 MMT production of sugar while the production in 2017-18 was 6.63 MMT.

The production of sugar was more than the domestic requirement in 2016-17 and 2017-18. Therefore, there was no impact of export of sugar on the retail price in the market. During the year 2018-19, the production of sugar was expected to be low and this was intimated by the Secretary Ministry of Industries and Production but even then the PTI-led government gave approval of export of 1 MMT sugar.

“The export of 1.00 million tons of sugar was recommended during the Sugar Advisory Board (SAB) meeting held on Sept 11, 2018 as excess sugar was available. The ECC approved the export of 1.00 and 0.10 million tons of sugar on Oct 2 and Dec 4, 2019 respectively. However, during the same meeting Secretary Ministry of National Food Security raised the issue that low production of sugarcane was expected in the upcoming season due to water shortage. Despite that the export was recommended and without making it time-bound. In the meeting of SAB held on April 15, 2019 and May 6, 2019, Punjab raised concern over the rising prices of the sugar in the local market. The issue of increasing price of sugar was discussed in the subsequent meetings in June 2019 as well but no decision was taken recommending ban on export despite the fact that estimated stocks calculation presented during the meeting showed net stocks as negative 0.191 million tons (excluding the stocks of 7 sugar mills of Sindh). Finally, the ban on export was recommended on Jan 28, 2020 and the ban was imposed on Feb 18, 2020”, the report says.

According to the report, the sugar mills owners were paid Rs14.71 billion subsidy in 2017. The sugar prices in the local market on January 2017 were Rs65.2 per kilogram. However, at the end of the year the sugar prices went down to Rs54.7 per kilogram. This shows that the sugar prices were reduced by Rs10.5 per kilogram from January to December 2017.

During the year 2018, the sugar prices remained almost constant as on January 2018, the price of 1 kilogram sugar was Rs54.1 and in December 2018 the price was Rs56.1 per kilogram. The prices went high from January 2019. This was the time when the PTI government allowed the sugar mills owners to export the sugar and approved Rs3 billion subsidy for them.

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