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Wednesday October 27, 2021

Sugar crisis: Hike in sugar prices cost whooping Rs85 billion to consumers

April 08, 2020

ISLAMABAD: The common man has paid a heavy price of sugar crisis in terms of price hike. During last 14 months, the consumers have paid almost Rs85 billion rupees extra due to the unprecedented hike in sugar prices out of which around Rs 76 billion alone were pocketed by the sugar mills owners, data analysis establishes.

In December 2018 the ex-mill price (the price on which mills sell sugar to the buyers) was Rs 51.64 whereas the retail price in the market was Rs55.99. However, from December 2018 to February 2020, the ex-mill price has increased by almost Rs20 due to which the retail price was also increased by Rs 24 per kilogram. Pakistan’s total annual consumption of sugar is 5.2 million metric ton (5.2 billion kilogram). The sugar mills owners pocketed more than Rs 76 billion due to this unchecked price hike of sugar in Pakistan. This huge amount is in addition to the Rs 3 billion subsidy by the Punjab government.

An analysis was conducted to understand which sugar mill owners earned how much from the Rs 76 billion generated through price hike by the sugar mills owners. According to the official report, Jahangir Tareen’s owned JDW group’s share in the total national production is 19.97 percent, Makhdoom Khusro Bakhtiar’s brother Omer Sheryar ‘s RYK group share is 12.24 percent, Al-Moiz group’s share in the national production is 6.8 percent, Sharif family’s share is 4.54 percent, Omni group’s share is 1.66 percent whereas rest of the others have 49.90 percent in the national production for the year 2018-19. Hence, almost 51 percent of Rs76 billion went into these six influential families’ pockets.

During the year 2018 the sugar prices remained almost constant as in January 2018, the price of one kilogram sugar was Rs54.1 and in December 2018 the price was raised to Rs55.99 per kilogram. The sugar prices started increasing from January 2019 onwards. This was the time when the PTI government allowed the sugar mills owner to export the sugar and also approved Rs3 billion subsidy. The major increase in ex-mill price occurred between December 2018 to June 2019 when it was increased by almost Rs. 12 per kg which is from Rs. 51.64 to Rs. 63.59 per kg. This period saw no increase in the sales or other taxes and the price of sugarcane, the major input, was also stable. The increase in retail price from July 2019 to January 2020 remained in the range from Rs, 71 per kg to Rs. 74.64 per kg. The data, therefore, does not show any major impact of GST on retail price.

As per the inquiry report, “GST in the financial year 2018-2019 was 8% for the filers and 11% for the non-filers purchasing sugar from the sugar mills. But since majority of the buyers were non-filers so the GST was charged at 11% in majority of the cases. In the current financial year 2019-2020 the government has increased the GST to 17% across the board. The revenue of FBR from sugar sector, in terms of sales tax, has increased 62.3%; the increase in revenue is not proportionate to increase in GST. The same increase is transferred to the consumers ultimately as it is included in the ex-mill price calculations of PSNIA. Furthermore, the FBR calculates the minimum ex-mill price of sugar at Rs. 60 per Kg irrespective of the fact that it may be lower. Hence the GST on sugar is Rs. 10.20 per kg at the rate of Rs. 60 per kg ex-mill price. Any additional price over the minimum baseline is to be proportionately added @ 17% for the additional price.”

In order to determine the profit earned by sugar mills, we have to bifurcate the annual sugar consumption into months because the inquiry report has shown the sugar prices changed every month. The monthly sugar consumption of Pakistan is 0.43 million metric ton or 433,333,333kg (433 million kg. There are two different price mechanism of sugar, one is called ex-mills prices (the price at which mills sell the sugar to buyers) and the other is retail price (the price at which the retailer or shopkeeper sell to the consumer). The inquiry committee on sugar crisis has included both the ex-mill price as well as the retail price. We will analyse the impact of price month-wise to determine how much money was minted by the sugar mills owners, and what is the total financial impact of price hike on consumer or common man?

In January 2019, according to the price quoted in the inquiry report the ex-mill sugar price in December 2018 was 51.64 which increased to Rs54.30. This means the ex-mill price was increased by Rs2.66 per kilogram. The monthly national sugar consumption is 433 million kilogram. If we calculate the additional income of the mills owners through this price hike, they earned Rs1.15 billion additional in the month of January 2019. In December 2018 the retail price of sugar was Rs55.99 which increased to Rs59.30. This means the sugar price in the retail market was increased by Rs3.31 per kg. The average monthly national consumption of sugar is 433 million kilogram. Hence the consumer has to pay Rs1.43 billion extra for the sugar in January 2019.

The ex-mill price in February 2019 was Rs54.73 whereas in December 2018 the price was Rs51.64. This means the ex-mill price was increased by Rs3.09 per kilogram as compared to December. The average monthly national consumption of sugar is 433 million kilogram. Hence, the sugar mills owners earned Rs1.34 billion extra due to price hike which started from December 2018 onwards. According to the report, the retail price of sugar in December 2018 was Rs 55.99 per kg which increased to Rs 59.37 per kg in February — an increase of Rs3.38 per kg. The average monthly consumption is 433 million kg hence the consumer has to pay Rs1.64 billion extra as compared to December 2018 due to price hike.

The data shared by the inquiry committee’s report shows that the ex-mill price of sugar in March 2019 reached to Rs57.46 per kg as compared to Rs51.64 in December 2018 — an increase of Rs5.82 per kg. The average national monthly consumption of sugar is 433 million kg which means the sugar mills earned Rs2.52 billion extra as compared to December 2018 due to price hike. Similarly, the retail price of sugar in March 2019 reached to Rs61.15 per kg as compared to Rs55.99 in December 2018— an increase of Rs5.16 per kg. The average national consumption is 433 million kilogram. Hence the consumer has to pay Rs2.23 billion extra as compared to December 2018 due to price hike.

In April 2019, the ex-mill price of sugar reached to Rs60.49 per kg as compared to Rs 51.64 per kg in December 2018 —an increase of Rs8.85 per kg. The average monthly consumption is 433 million kilogram which means the sugar mills owners pocketed extra Rs3.83 billion. As per the data, the retail price of sugar in April 2019 reached to Rs65.03 per kg as compared to Rs59.99 per kg in December 2018 — an increase of Rs9.04 per kg. The average monthly national consumption is 433 million kg which means the consumer had to pay Rs3.91 billion extra due to price hike after December 2018.

The ex-mill price of sugar in May 2019 reached to Rs62.48 per kg as compared to Rs51.64 per kg in December — an increase of Rs10.84 per kg. Pakistan’s average monthly sugar consumption is 433 million kg which means the mill owners bagged additional Rs4.69 billion as compared to December 2018. In May 2019, the sugar was available in the retail market at the rate of Rs67.31 per kg as compared to Rs55.99 in December 2018 — an increase of Rs11.32 per kg. The monthly average sugar consumption is 433 million kilogram which means the consumer had to pay Rs4.9 billion extra due to price hike which started from December 2018 onwards.

In June 2019 the ex-mill sugar prices reached Rs63.59 per kg as compared to Rs51.64 per kg in December 2018 —an increase of Rs11.95. The monthly sugar consumption is 433 million kg which means the sugar mills owner earned Rs5.17 billion extra as compared to December 2018. The retail price of sugar in June 2019 reached to Rs71.44 per kg as compared to Rs55.99 per kg in December 2018 — an increase of Rs15.45. Pakistan’s average monthly sugar consumption is 433 million kilogram which means the consumer had to pay Rs6.69 billion extra as compared to December 2018 when the prices started increasing.

The ex-mill price in July 2019 reached to Rs65.73 per kg as compared to Rs 51.64 per kg in December 2018 —an increase of Rs14.09 per kg. The average monthly sugar consumption in Pakistan is 433 million kilogram which means the sugar mills owners pocketed Rs6.1 billion in July as compared to December 2018. Similarly the retail price of sugar in the market reached to Rs71.93 per kg as compared to Rs55.99 per kg in December 2018 — an increase of Rs 15.94 per kg. Pakistan’s monthly sugar consumption is 433 million kilogram hence the consumer had to pay extra Rs 6.9 billion as compared to what they paid in December 2018.

The ex-mill price of sugar in August 2019 reached to Rs68.62 per kg as compared to Rs51.64 per kg in December 2018 —an increase of Rs16.98. Pakistan’s average monthly sugar consumption is 433 million kilogram which means the sugar mills owners pocketed Rs 7.35 billion extra as compared to December 2018. The sugar prices in retail market reached to Rs75.14 per kg in August as compared to Rs55.99 per kg in December 2018 — an increase of Rs 19.15. The average monthly sugar consumption in Pakistan is 433 million kilogram hence the consumer had to pay Rs8.29 billion as compared to what they were paying in December for sugar.

The ex-mill price of sugar in September as per the inquiry committee report was Rs68.56 as compared to Rs51.64 in December 2018. This shows an increase of Rs 16.92 per kg. The average monthly sugar consumption is 433 million kilogram hence the mills owners earned additional Rs 7.33 billion as compared to December 2018. The retail price of sugar in the market reached to Rs 75.39 per kg in September 2019 as compared to Rs55.99 per kg in December —an increase of Rs 19.40. Pakistan consumes 433 million kilogram sugar on average in a month which means the consumer had to pay Rs8.4billion extra as compared to what they paid in December 2018.

In October 2019, the ex-mill price of sugar reached to Rs 68.30 per kg as compared to Rs 51.64 per kg in December 2018 — an increase of Rs 16.66 per kg. Pakistan’s average monthly sugar consumption is 433 million kilogram which means the mills owners pocketed additional Rs7.21 billion as compared to December 2018. Similarly, the retail price of sugar in the market was available at the rate of Rs 74.46 per kg as compared to Rs55.99 per kg in December 2018 —an increase of Rs18.47. The average monthly sugar consumption of Pakistan is 433 million kilogram hence; the consumer had to pay Rs 8 billion extra as compared to December 2018.

The ex-mill price of sugar in November 2019 reached to Rs67.42 as compared to Rs51.64 per kg in December 2018 — an increase of Rs 15.78 per kg. The monthly sugar consumption in Pakistan is almost 433 million kilogram which means the owners earned Rs 6.83 billion as compared to December 2018. The sugar price in the retail market reached to Rs 73.26 per kg in November 2019 as compared to Rs 55.99 per kg in December 2018 — an increase of Rs17.27 per kg. Pakistan’s monthly sugar consumption is almost 433 million kilogram which means the consumer had to pay additional Rs 7.48 billion.

In December 2019, the ex-mill price of sugar reached to Rs 67.48 per kg as compared to Rs Rs51.64 per kg in December 2018 —an increase of Rs 15.84 per kg. The average monthly sugar consumption in Pakistan is 433 million kilogram which means the sugar mills owners pocketed additional Rs 6.86 billion. Similarly, the retail price of sugar in the market reached to Rs 71.71 per kg as compared to Rs55.99 per kg in December 2018 — an increase of Rs 15.72 per kg. The monthly sugar consumption of Pakistan is almost 433 million kilogram which means the consumer had to pay Rs 6.81 billion extra as compared to December 2018.

In January 2020, the ex-mill price of sugar reached to Rs 69.14 per kg as compared to Rs 51.64 per kg in December 2018 —an increase of Rs 17.5 per kg. The average monthly sugar consumption is 433 million kilogram which means the mills owners earned Rs 7.58 billion extra as compared to December 2018. The retail price of sugar in the market reached to Rs74.64 per kg in January 2020 as compared to Rs 55.99 per kg in December 2020 — an increase of Rs 18.65 per kg. Pakistan’s average monthly consumption of sugar is 433 million which means the consumer had to pay Rs 8.08 billion extra.

The ex-mill price of sugar in February 2020 reached to Rs 71.56 per kg as compared to Rs 51.64 per kg in December 2018 — an increase of Rs 19.92 per kg. The monthly average sugar consumption is Rs 433 million which means the mills owners earned Rs 8.63 billion extra as compared to December 2018. Similarly, the market price of sugar reached to Rs 79.86 per kg in February 2020 as compared to Rs55.99 per kg in December 2018 — an increase of Rs23.87 per kg. Pakistan’s average monthly consumption is 433 million kilogram which means the consumers had to pay Rs 10.34 billion extra as compared to what they paid in December 2018.

It is pertinent to mention here that the government announced Rs 190 per 40 kg as the support price of sugarcane for the season 2019-20. However, due to the competition, the average price for the crushing season 2019-20 in Punjab was Rs 217 per 40 kg and Rs 226 per 40 kg in Sindh.