Pakistan : Competition Commission spells out reasons behind sugar crises
Pakistan’s Competition Commission says repeated sugar crises since 2008 stem from export-driven shortages, unreliable data, and excessive reliance on sugar millers in policymaking. Its reform blueprint calls for real-time data systems, ending the ban on new mills, a unified national regulator, conflict-of-interest rules, strategic reserves, quality-based cane pricing, and full market liberalisation.
ISLAMABAD: The Competition Commission of Pakistan (CCP) has said that recurring sugar crises from 2008 to 2025 were caused by export-led shortages in the domestic market due to reliance on inaccurate data, compounded by the ECC’s excessive reliance on information and data provided by the PSMA and the SAB and the presence of sugar millers in the decision-making process.
The CCP, in its blueprint titled “towards deregulation: reforming sugar industry of Pakistan for market efficiency” shared with a parliamentary panel argued that this way the millers are able to unduly shape critical policy and trade decisions at the expense of independent oversight.
Successive governments have been unable to develop effective mechanism for gathering and validating production, stock and trade data across the supply chain. This created a data vacuum that enabled regulatory loopholes and market manipulation.
Sugar mill owners profited greatly by exploiting policy gaps. This included earning foreign exchange by securing export permissions and subsequently benefitting from resultant domestic price surge due to shortages. Resultantly, profits privatized and losses are nationalized.
Despite being the fifth-largest sugarcane producer and sixth-largest cane sugar manufacturer globally, Pakistan has faced recurring crises of sugar.
Although, the sugar industry is the second largest agro-based industry of Pakistan which plays a vital role in employment, industrial output, and rural livelihoods yet its impressive scale is undermined by deep-rooted inefficiencies, repeated supply-demand crises, and persistent price volatility issues that place significant social and economic burdens on the nation.
Even with years of policy attention, the sector remains impacted by market manipulation, hoarding, inconsistent application of minimum support prices, overlapping Provincial and Federal mandates, and a lack of transparent, real-time data sharing. This fragmented and inefficient environment enables regulatory arbitrage, discourages competition, and leaves the industry exposed to the influence of dominant vested interests.
According to the analysis, evidence shows that recent crises including the anticipation of shortages following major export approvals, recurring hoarding, and artificially engineered scarcity – are aggravated by weak enforcement mechanisms, overdue farmer payments, and obsolete weight-based procurement that ignores cane quality.
Policy weaknesses further allow mills to exploit regulatory gaps, while delayed or variable government interventions have exacerbated market instability.
The report submitted diagnosed these core bottlenecks and set out a bold, actionable blueprint for reform founded on eight pillars: (i) Real-Time Data Integration and Supply Chain Transparency: The implementation of digital infrastructure, leveraging Internet of Things sensors, blockchain traceability, and secure real-time data portals, will enable instant tracking of cane deliveries, quality parameters, and mill yields. This will facilitate tamper-proof record-keeping, proactive flagging of irregular activities, and rapid regulatory interventions, significantly mitigating risks of collusion and expediting farmer payments;(ii) removal of the ban on new mills and industrial modernization: To catalyse sectoral efficiency, the longstanding moratorium on establishment and expansion of sugar mills must be abolished. Entry barriers should be reduced, regulatory procedures streamlined, and incentives provided for modernization, vertical integration, and adoption of diversified manufacturing including ethanol, molasses, and baggasse-based energy. Joint public-private research initiatives will promote new technologies and high-sucrose cane varieties; (iii) Change in regulatory mechanism: Regulatory fragmentation will be addressed through the establishment of a National Sugar Market Surveillance Authority (NSMSA) under the relevant Ministry. This Authority will aggregate and analyse real-time production, pricing, and trade data sourced from Provincial Cane Commissioners and other agencies, ensuring synchronized, data-driven interventions and effective referral of collusive conduct to the CCP; (iv) countering political economy of sugar: A Conflict-of-Interest Code will be enacted to prohibit individuals with direct links to the mill owners or PSMA from holding regulatory roles. Real-time, independently verified data will underpin all export and import recommendations, generated by the NSMSA. This reform dismantles elite capture and strengthens institutional accountability, basing key trade and policy decisions on transparent metrics rather than lobbied estimates; (v) sugarcane quality standards and certification framework: Reform will introduce recoverable sugar-based pricing, aligned with international best practices such as Brazil’s CONSECANA model, ensuring fair remuneration for quality cane through the mandatory use of digital quality certificates and certified laboratory testing. Provincial enforcement capacity will be strengthened for farmer outreach and laboratory management; (vi) Strategic reserve management: The current ad hoc system will be overhauled in favour of a unified, rule-based buffer stock managed by the Trading Corporation of Pakistan (TCP).
Stock levels will be calibrated to one-month projected consumption cycles, with transparent procurement and release protocols to absorb market shocks and counteract speculative hoarding; (vii) Towards a coherent National Regulatory System: Provincial sugar laws and hoarding prevention statutes will be consolidated under a unified Federal directive, modeled on reforms successful in Australia.
The NSMSA will assume licencing, monitoring, and enforcement responsibilities, replacing duplicative and contradictory regulatory frameworks; and (viii) Complete market liberalization framework: The phasing out of administratively determined price floors and ceilings (MSP, MRP) will allow for market-driven price formation.
Export and import bans will be lifted, subject to independently verified consumption and carryover ratios, establishing a competitive, consumer-oriented environment insulated from political discretion and cartel manipulation.
Concluding its analysis, CCP stated that Pakistan’s sugar industry is worth Rs 1,000-1,500 billion benefitting only 78 mills. This massive market fails to deliver gains to the wider public.
The PSMA forms a tightly coordinated network at district, provincial, and national level. The collective strength of the mills consistently outplays the government’s regulatory mechanism.
Market dynamics of the sugar industry are shaped by concentrated ownership, state-controlled pricing, routine delays in farmer payments, obsolete mills causing inefficiency, little use of by-products, and poor supply chain tracking. Furthermore, use of inaccurate production data prevents planning and promotes manipulation.
The sugar sector in Pakistan operates under 26 overlapping federal and provincial laws. This maze of statutes allows regulatory loopholes to flourish and undermines enforcement. It lets the political elites maintain control over entry, pricing, and compliance. Cartel behaviour persists as a result, while new investors and consumers face persistent disadvantages.
The proposed blueprint for reforms calls for decisive, forward-looking actions. The transformation must start with centralizing sugar sector oversight through a unified National Sugar Market Surveillance Authority. To complement this reform, a strict conflict-of-interest code is essential preventing anyone with direct or indirect links to sugar millownership or PSMA from having decision-making powers.
CCP further contended that effective oversight must be paired with opening the market for new mills and requiring current players to modernize. Real-time digital integration of all production, stock, and trade data and strengthening of the provincial Cane Commissioners is essential to resolve the chronic information deficit. The blueprint further proposes to introduce a recoverable sugar-based pricing framework so that cane payments will directly reward actual sucrose content benefiting farmers.
It further states that strategic stability is then delivered by building a transparent, rule-based national strategic reserve to be managed by the TCP. Moreover, it is proposed to consolidate all sugar sector statutes into a coherent single federal regime vesting licensing, monitoring, and enforcement powers in the proposed NSMSA.
Finally, the market needs to be liberalized. This means eliminating government’s role in the market and ensuring trade decisions are evidence-based. Adopting this blueprint for reforms is the only way to ensure Pakistan’s limited resources inthe sugar industry are used for the greatest public good.
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Source : Business Recorder
