ISLAMABAD: Deputy Prime Minister Ishaq Dar Monday chaired a meeting to review escalating sugar prices in the domestic market and urged millers to reduce the prices at retail stage.
Top official sources confirmed to The News that the government outright rejected the Pakistan Sugar Mills Association (PSMA) estimation to calculate and fix ex-mill price at Rs175 per kilogram, arguing that the price of sugar on the basis of actual assessment hovered less than Rs154 per kg.
Dar conveyed a clear message to the PSMA that millers would have to reduce prices in accordance with the actual cost. “If sugar sells at approximately Rs165 per kg in the domestic market at retail stage, it will be a fair price for both the millers and voiceless consumers,” the official privy to details of meetings held on the lingering crisis told The News.
The millers had replied that their annual general meeting (AGM) would be held soon and they would come up with a proposal to reduce the prices. The government made it clear that on the basis of manipulation, any effort to exploit the market would be dealt with an iron hand. It said there were proofs that the sugar barons were planning to escalate the prices up to Rs200 to Rs220 per kg in the domestic market. If Rs20 per kg price was escalated for the whole year, it could result in pocketing of Rs140 billion. With doubling profit up to Rs40, the sugar mills are supposed to earn lofty profits of Rs280 billion in a year. If the extraordinary profit increased up to Rs60, then they are supposed to pocket additional Rs400 billion in just a year.
The government, after consultations, has estimated the total production cost of sugar, including sales tax, at less than Rs154 per kg, whereas sugar millers claim their costs exceed Rs175 to Rs180 per kg — suggesting an excess profit of Rs20 to Rs25 per kg.
With an average sugarcane price of Rs450 per 40 kg, the raw material cost translates to Rs1125-1150 per 100 kg of sugarcane. Factoring in manufacturing and administrative costs, the actual sugar production cost is Rs130 per kg, which rises to Rs154 per kg after applying 18pc GST.
Experts suggest that an ex-mill price below Rs165 per kg — accounting for transportation and logistics — would be a fair balance for both producers and consumers.