Deja vu for Pakistan as sugar import prospect looms despite surplus at start of year

LAHORE: Authorities are clueless about much of the 1.4 million ton surplus sugar that has gone missing, prompting them to clamp down on the smuggling of the commodity in the strictest possible manner while exploring costly imports to bridge the shortfall.

This has come to the fore following the smuggling of about 0.9 million tons of sugar by so-called unknown elements and over 0.25 million tons of exports by the mill owners. Consequently, the country may descend into a sugar deficit regime even after having about 20 percent surplus output against annual demand at the start of the marketing year, courtesy alleged clandestine involvement of sugar mills and dealers in connivance with tax authorities and border officials.

The resultant price hike of sugar to over Rs170 per kg in the retail market against less than Rs100 at the end of the crushing season early this year continues to haunt consumers. The pressing issue of surging sugar prices and the shortfall exposes the role of authorities and sugar mill owners alike. There are many unanswered questions in this connection but no one is willing to answer.

Responding to the allegations of indulging in or facilitating the smuggling of sugar, the management of sugar mills and authorities are blaming each other for the surplus stock that went missing, flawed supply chain management, and porous border checks.

Although, Punjab feels comfortable meeting the sugar requirement till the end of the current season with available stocks, it has clamped down on sugar transportation for smuggling to Afghanistan through Sindh, Balochistan, and Khyber Pakhtunkhwa to curb pilferage of the commodity. Punjab feels comfortable with its 1.1 million-ton stocks. With less than 0.35 million tons of monthly consumption, it may easily meet its sugar requirements. So, the Punjab doesn’t need imports.

On the other hand, mills in Sindh and the KP are rapidly drying up stocks due to unabated smuggling to Afghanistan through Balochistan and the tribal belt, where sugar is said to be sold at over Rs210 per kg. To meet the demand of these provinces and maintain a buffer stock, imports of about 0.3 million tons of sugar are said to be required to curb hoarding, ease the supply chain and stabilise prices.

In a damage control exercise, a sugar mill owner said that the supply of sweeteners had completely been stopped to the other provinces. A senior official of the Punjab government squarely blamed the sugar mill management for hoarding, price-hike and smuggling of the commodity. He posed a question: Why did sugar mill owners get suspended from monitoring sugar through the courts if they were not involved in smuggling? “We have been left with no option but to discontinue implementation of the Punjab Sugar Supply Management Order 2012 subsequently,” he said.

Reacting to the notion of alleged smuggling by mills, a former chairman of the Pakistan Sugar Mills Association (PSMA) posed a counter-question, saying, how come mill owners become culpable when the government fails to halt smuggling? On condition of anonymity, he was of the view that if the industry was permitted to export the commodity at an appropriate time, it would not have disappeared like this. He said the government would have earned much-needed forex exchange besides better monitoring stocks from time to time. Replying to a question, he said the prime reason for smuggling was far lower rates in the local market than the landed cost in Afghanistan for the imported sugar.

Abdul Waheed Ch, a senior member of PSMA, claimed sugar mills had reported sugar smuggling to the government. He also posed a question: If sugar is being smuggled, what has the mills got to do with it? It is typical of every government to blame its failure on the sugar mills. When they could not stop smuggling themselves, they started to defame the mills. It is even though whatever sugar comes out of the mills, the name of the dealer and the city it goes to are being reported to the administration in letter and spirit.

He said that after producing 6.8 million tons of sugar in the 2022-23 crushing season with a carry-forward of 1.0 million tons, a total of 7.8 million metric tons of sugar were produced in the ongoing season.

Against the national requirement of 6.4 million tons, as many as 1.4 million tons were surplus. Out of this, 2.5 million tons were allowed to be exported. He said the investigation should be held to see where 1.15 million tons of sugar went.

Meanwhile, the Federal Board of Revenue (FBR) has also been accused of overlooking the pilferage of sugar in the form of smuggling despite implementing a much-touted Track and Trace system. It is claimed that mills and dealers have made billions by smuggling sugar to Afghanistan with complete impunity, creating a shortage of commodities in the country. When contacted, a spokesperson for FBR did not respond to the allegations.

In a related development, former finance minister Ishaq Dar stated on X: “With the next crushing season only 2.5 months away, i.e., by November 16, 2023, there is no need to raise a false alarm over existing sugar stocks of 2.3 million tons. “Monthly consumption of sugar is just over half a million tons, and opening stock at the start of the new crushing season in mid-November 23 will be around one million tons.”

He added: “The increase in retail prices is thus not a reflection of stock position but exploitative policies of unscrupulous businesses and poor governance.”

“The PDM government had allowed the export of a quarter million tons after due verification by the relevant authorities and institutions of the then opening stock, crushing results, national consumption, and maintenance of strategic reserves of sugar in the country, and that made it possible to earn precious US $125 million for the national foreign exchange reserves,” he concluded.