Sugar price hike has nothing to do with exports, says PSMA

LAHORE: The Pakistan Sugar Mills Association (PSMA) has categorically rejected a news item which appeared in a section of the media that the current surge in the prices of sugar is due to the export of the commodity.

In a statement, PSMA mentioned that the sugar industry of Pakistan was demanding permission for the export of surplus sugar, since March 2022, but the government had been continuously delaying it.

Then the price of sugar was in the range of Rs 80-85 per kilogram, while the cost of production of sugar ranged between Rs 105-110 per kilogram. Pakistan then had a surplus sugar stock of 1.2 million metric tons. The sugar industry had asked the government to allow export of at least 1.0 million tons of surplus sugar out of the 1.2 million tons surplus. However, the government inordinately delayed the decision.

The association also added in their statement that timely exports would have given the correct signal to the farmer to plant more sugarcane or improve the yield of their crop by timely inputs. In December 2022, the government finally gave permission to export 250,000 metric tons of sugar. After fulfilling all governmental prerequisites, the sugar industry has exported 172,180 metric tons of sugar till March 2023 earning approximately USD 85 million.

According to the PSMA, the continually increasing international sugar price meant that sugar domestically in Pakistan is priced at half of prices across our border in Afghanistan. PSMA through its spokesman had continually stressed the need to Control our porous borders to Afghanistan or otherwise the huge arbitrage would make it lucrative to smuggle this commodity, as well, along with what has been seen happening in urea and wheat previously.

PSMA had time and again sensitised the government that the smugglers mafia would take advantage of higher sugar prices in the international market and smuggle sugar out of the country. If the government had given due consideration to the apprehensions and demands of the sugar industry then its earnings of foreign exchange would have been added to the national exchequer instead of landing into the pockets of smugglers mafia. Sadly, the industry couldn’t export the surplus and the country couldn’t benefit from this due to the huge smuggling.

It is also important to address the rising cost of sugar production in Pakistan. In the last crushing season, the government had increased the minimum support price of sugarcane from Rs 225 per 40-kg to Rs 300 per 40-kg (a 33 percent increase), resulting in jacking up the cost of production of sugar to Rs 130 per kilogram. While sugarcane is a major cost component, there are other key elements, as well. An increase in Sales Tax from 17 percent to 18 percent means that with any increase in the price of sugar the federal government gets 18 percent benefit.

They also added that the doubling in the mark-up rates of banks from 12 percent to 24 percent has been a major reason for cost increase, since sugarcane payments are made in three to four months while sugar is sold all year around due to its monthly distribution. Other factors that contribute to the issues include raising of minimum labour wages from Rs 16,000 to Rs 25,000, increase in the prices of different chemicals and spare parts of the machinery of around 70-80 percent as they are imported and the exorbitant rise in the oil prices leading to higher transport costs for sugarcane. All these elements are factors in the increase of cost of production of sugar up to Rs 130 per kilogram.

“Despite all the challenges faced by the sugar industry the price of sugar has increased much less in comparison to food inflation in the country which has gone up by 47 percent in the last one year. It might also be reiterated that the sugar industry of Pakistan set up several discounted sugar stalls much below its cost of production in different cities of the country during the holy month of Ramadan. This step of the sugar industry was also acknowledged by government circles. If the government would have timely allowed export of one million tons of sugar it would have ultimately given a positive message to the farmer who would have timely increased plantation and invested more in their fields to increase yield,” PSMA stated.

According to the association, this would allow the country to sow more sugarcane, which could have taken the country to a position of exporting surplus sugar of two billion dollars’ worth.

“The sugar industry is responsible and one of the oldest entities of Pakistan and pays more than Rs.100 billion to the government in the form of different taxes. We condemn such allegations on a responsible industry which is highly deplorable and against facts. Clubbing the hike in sugar prices with the export of sugar is totally unjustifiable and an attempt to tarnish the image of a responsible industry of Pakistan, which is totally against the factual position,” PSMA concluded.

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