Exporting sugar

Despite increasing sugar prices at home, the State Bank of Pakistan (SBP) has allowed the export of sugar from the country. Although conditions have been attached to the sugar mills that have been given export licenses, the impact of the export of sugar on the local market has been visible. In March, sugar prices continued to increase despite surplus production. This was apparently done on the grounds that sugar mills had access to more lucrative foreign markets, such as Afghanistan. The opening of the Torkham border may be a positive measure in terms of its overall effect but the impact on the prices of the essential commodity of sugar has been bad for Pakistani consumers. In the current season, the government has allowed the export of 200,000 tonnes of sugar. Sugar mills have been asked to ensure that they have cleared the dues of farmers as well as ensure that they are operating at full capacity before being allowed export licences. In principle, these are positive measures, but the sugar cane economy as well as sugar prices remain precariously balanced. In 2009, the Supreme Court had to intervene to stop sugar prices from hiking up beyond the reach of the domestic consumer.

The decision to allow the export of stable foods out of the country has often resulted in crisis. The almost comically poor decision in 2007 to allow the export of half a million tonnes of wheat out of the country based on faulty projections is still fresh in our memory. The country then had to import wheat in a season in which it was supposed to have had a bumper crop. This is what underlies the cautionary approach taken by the SBP to the sugar exports. But there has been little done to remedy the concerns of consumers regarding potentially higher sugar prices. The Economic Coordination Committee of the Cabinet is still charged with monitoring sugar prices and retains the authority to stop further exports if local prices continue to increase. The export of essential foods is always tricky in a country where agricultural production is tightly balanced. The agricultural sector has been facing serious challenges, including the import of cheaper fruits and vegetables. Allowing the export of sugar also puts pressure on other agricultural outputs as it could result in an over-cultivating sugar cane, which is by far the most water intensive of commodities. The government has to find the right balance between incentivising the sugar mill industry and its associated economy, farmers and consumers within Pakistan.