Hike in sugar price imminent, says dealer

LAHORE: Mills have stopped sugar supply to an already turbulent market as the federal government is yet to take a decision about the price of the commodity despite the lapse of deadline.

There is no headway in determining sugar prices by the government following an agreement with the Pakistan Sugar Mills Association (PSMA) to work out prices by April 20. It has been alleged that sugar mills ceased their sugar supply to market after the government imposed a price cap last month. As a result, dealers are nearing a complete depletion of their stock, and the price of sweeteners is increasing.

Market insiders fear that inaction by the government would seriously hurt the interest of consumers. Sources have indicated that companies affiliated with major players hailing from South Punjab are significantly contributing to price volatility as authorities are acting as a silent spectator.

A senior member of the PSMA said there is no progress on sugar price revision in the light of an announcement made by Ishaq Dar, deputy prime minister, last month. Therefore, the sugar price is set to increase by one to one and a half rupees per kilogram in the market and it is likely to increase further.

Sugar dealers from the local wholesale market said the price of 100kg of sugar in the market is Rs 16,200, but sugar mills have not supplied sugar to the market for the last several days, causing a shortage in the market. They said the government had fixed the price of a 100kg sugar bag at Rs 15,900 for one month on March 19. We were told that a meeting of sugar mills was to be held on Tuesday (April 22) to fix the new price of sugar. But no conclusion has been developed by the mills as yet. However, an increase in the price of sugar by Rs 2 to 3 per kg is imminent, said a sugar dealer.

On the other hand, a senior sugar dealer said no concrete development has been made in assessing the sugar production cost. He added that most of the sugar mills are not selling commodity to dealers as prices are creeping up steadily. He insisted that mills have been not selling the commodity for the last 30 days when the government capped sugar rates. Dealers are off-loading stocks. He alleged that mills are completely dictating the supply chain with complete impunity. In such a situation, mills remain ultimate beneficiary. He added that the only change that happened since the government’s intervention in capping the price is that the dealers stock is almost finished.

Zaka Ashraf, newly-appointed PSMA chairman, however, downplayed the reports of short sugar supply and its price hike. He claimed the sugar price is much below the cost and mills are losing money. He claimed that people who had bought sugar from mills are lifting it.

A top official of the Federal Ministry of Industries and Production described the brewing sugar crisis in a different way. He said the FBR’s move might have affected the sugar supply to market for a short period of time. He said the FBR introduced the minimum rate of sugar for sales tax purposes, causing uncertainty in the market.

This move might have affected those dealers who had purchased sugar earlier in the season when prices were down but had not lifted their sugar yet. They got hit by higher sales tax resulting in uncertainty as to who was going to pay the extra tax, the dealers or the mills.