Pakistan, often referred to as a “sugar surplus” country, has seen its sugar industry lobbying for an annual export quota of one million tons of refined sugar, starting this year. The industry claims that there is currently an exportable surplus of 1.5 to 1.9 million tons of refined sugar. However, the government has yet to decide on this proposal, carefully weighing the pros and cons. Verification of current sugar stocks is essential, and the government must ensure that allowing exports now will not lead to a domestic shortage, necessitating costly imports later.
Pakistan, often referred to as a “sugar surplus” country, has seen its sugar industry lobbying for an annual export quota of one million tons of refined sugar, starting this year. The industry claims that there is currently an exportable surplus of 1.5 to 1.9 million tons of refined sugar. However, the government has yet to decide on this proposal, carefully weighing the pros and cons. Verification of current sugar stocks is essential, and the government must ensure that allowing exports now will not lead to a domestic shortage, necessitating costly imports later.
This scenario has occurred in the past, such as in 2022-23 when the PDM government permitted the export of nearly a million tons of sugar, resulting in a spike in retail prices and the subsequent withdrawal of the export order when about half-a-million tons sugar was already dispatched abroad. Generally, the sugar industry is considered responsible for repeated sugar crises in the country. Since 2010-11, Pakistan has consistently produced surplus sugar, yet it has imported sugar since 2008-09.
For instance, in 2021, sugar imports totaled 281,328 tons, and in 2022, the figure rose to 312,477 tons to fill the gap between supply and demand. The sugar industry in Pakistan is dominated by influential political families who often manipulate export, import, and pricing policies to their advantage. Many times, the industry was also granted tax incentives on exports of sugar. Public opinion suggests that the sugar industry will likely succeed in securing permission for exports given its political clout.
The sugar industry is a significant contributor to Pakistan's economy, providing employment, supporting rural development, and enhancing agricultural output. Pakistan ranks among the top ten sugar producers globally, with most of the industry based in Punjab and Sindh provinces. The country has about 90 sugar mills, all in the private sector, which not only produce refined and raw sugar but also generate by-products like molasses, bagasse and beet-pulp, used in various industries, and ethyl alcohol, which is mostly exported. In 2023, the industry produced 7.92 million tons of sugar, the highest production in over a decade.
The industry claims that sugar consumption in Pakistan in 2024 is 6.3 million tons, with production for 2024-25 projected at 6.8 million tons. The analysts believe that the realistic surplus sugar at the next harvest in November will not be more than 270,000 tons for export. Pakistan is a major sugar consumer, with per capita consumption at over 27 kg compared to the global average of 22 kg. Despite this, the industry reported a net profit, the highest ever, of over Rs 22 billion in 2022-23 (October 2022-September 2023) mainly due to export earnings, while domestic sugar prices increased by 28% basically as a result of imports at high rates.
Despite its importance, the sugar industry in Pakistan faces several challenges that impact its efficiency and profitability. These include the cyclic nature of sugar production influenced by weather conditions, fluctuating sugarcane prices, and inconsistent government policies. Outdated technology and inefficient production processes further limit the industry's competitiveness globally, especially as the international market increasingly adopts sugar substitutes and alternatives.
Modernizing and upgrading technology in sugar mills is crucial. Many mills rely on outdated equipment, leading to production inefficiencies and higher operational costs. Advancements in sugar technology, such as automation systems, computerized controls, data analytics, and new techniques, can significantly enhance productivity, reduce waste, and improve sugar quality.
Sustainable practices like water conservation, energy efficiency, and waste management are increasingly important. Sugar mills must invest in eco-friendly initiatives to minimize their environmental impact and comply with regulations aimed at mitigating climate change and preserving natural resources.
The financial health of the sugar industry is closely tied to government policies, market dynamics, and regulatory frameworks. Subsidies, support prices for sugarcane, and import/export policies heavily influence profitability and stability. However, inconsistent policies and market interventions often lead to price distortions, surplus production, and financial strains on producers and consumers. The industry also faces liquidity challenges due to delayed payments to sugarcane growers, mounting debts, and inadequate access to credit facilities.
Despite these challenges, the sugar industry in Pakistan has immense growth potential. With a growing population and increasing demand for sugar and its by-products, there are ample opportunities for expansion and diversification. Value-added products such as ethanol, bioenergy, and specialty sugars can enhance the industry's resilience and profitability while contributing to sustainable development goals.
To realize this potential, stakeholders must prioritize investments in research and development, infrastructure upgrades, and capacity building. Partnerships with international organizations and investors can facilitate knowledge transfer, technology transfer, and market access, driving innovation and competitiveness in the industry. However, the industry lags behind other countries in yields, recovery rates, and productivity. Cartelization is common, restricting new entrants. The Competition Commission of Pakistan imposed a cumulative penalty of Rs 44 billion on 84 sugar mills in May 2020 for cartelization, which remains unpaid due to ongoing legal battles.
In conclusion, Pakistan's sugar industry stands at a critical juncture, facing numerous challenges and opportunities. By addressing technical and financial issues, embracing innovation, and adopting sustainable practices, the industry can overcome hurdles and thrive in the global marketplace. With concerted efforts from all stakeholders, Pakistan's sugar industry can play a pivotal role in driving economic growth, ensuring food security, and fostering sustainable development for years to come.
The writer is retired chairman of State Engineering Corporation
