Pakistan : Sugar makes the world go round
Pakistan’s sugar price crisis exposes political and corporate collusion. Despite PM Shehbaz Sharif’s pledge to cap rates at Rs140 per kg, prices soared to Rs180. Deputy PM Ishaq Dar failed to control the sugar cartel, settling at Rs164. With mill owners in every major party, regulatory efforts remain futile, ensuring future price hikes and windfall profits.
They say politicians won’t make a promise they could deliver on. The recent so-called sugar price ‘crisis’ has once again proved this saying right. Prime Minister Shehbaz Sharif, whose own family owns sugar mills in Punjab, had promised not to let the sweetener’s rates go up beyond Rs140 a kilo when his administration allowed a portion of the alleged unsold surplus stock from the past two years to be exported a few months back. Yet, the sugar prices have hit the roof, peaking at Rs180 from Rs130 or less at the start of 2025.
This was in spite of consistent fresh supplies to the market from the new harvest that began at the end of November, as well as the unsold stocks that could not be shipped out of the country.
How powerful what many fondly dub the sugar cartel is can be gauged from the unfortunate fact that Deputy Prime Minister Ishaq Dar, who in his heydays would shout down the dollar rates from the Punjab Governor’s House, was unable to convince the manufacturers to bring down their ex-factory rates below Rs159, which is higher by Rs19 or 13.5 per cent compared to the earlier maximum agreed threshold. This has allowed, as noted by an Islamabad-based reporter, the mill owners the bonanza of earning higher revenues from local and overseas markets.
This episode must have made the deputy prime minister, who also holds the portfolio of external affairs, feel helpless, if not speechless. He informed the consumers after meeting with the Pakistan Sugar Mills Association (PSMA) that the committee formed by his boss under his chairmanship had agreed to fix retail prices at Rs164 — again 13pc above the rate set when permitting the export of 800,000 metric tonnes of sugar (12pc of the last year’s harvest) — for the next month.
In return for the favour, Mr Dar made a commitment with the wealthy mill owners that the antitrust watchdog — the Competition Commission of Pakistan (CCP) — would also keep from investigating price-fixing allegations against the cartel. It remains unclear if a deputy prime minister, or even his boss, can interfere with the CCP decisions and shut down its enquiries.
The Food Security Ministry, according to a media report, estimated that the increase of every Rs1 in the per-kilogram consumer prices translates into an additional profit of nearly Rs2.8 billion. At Rs164, the sweetener is Rs19 more expensive than it was a year ago, which translates into windfall profits of more than Rs53bn for those involved in the sugar trade supply chain.
The Shehbaz Sharif setup may tout the negotiated “reduction” in sugar prices as its success, but it is not. Not that the soaring sugar price, which stood at Rs172 in the retail market when Mr Dar negotiated a cut with the manufacturers, or, for that matter, the political clout of the mill owners found in every big party, matters much to the inflation-stricken low-middle-income households. It nevertheless exposes the vulnerability of the present minority PML-N administration, already facing a legitimacy crisis since last year’s flawed polls.
Sugar has always had more political value in Pakistan than its nutritional value. Though the power of sugar pricing shocks to destabilise and eventually force out a government (legend has it that Gen Ayub Khan lost his grip on power because he had allowed a 50 paisa — or was it less than that? — increase in the sweetener’s prices) may have diminished, it still can divert the focus of the rulers away from bigger and more urgent economic issues. Otherwise, why would the foreign minister waste almost a day helping the mill owners legitimise their additional profits?
However, there are some, like former finance minister Miftah Ismail, who still believe that they could attract public attention by raising the issue of higher sugar rates at press conferences and challenging his former boss, who did not think twice before replacing him with Ishaq Dar in September 2022. But the Awaam Party leader, who is more popular in the country’s chattering classes than the party he has co-founded, appears to have misread the situation, just like Imran Khan.
Former prime minister Imran Khan had also thought that strict action against the mill owners for spiking the sugar prices would help him win back public support he had lost due to his mismanagement of the economy. In the end, he lost the support of his wily friend Jehangir Tarin, the largest sugar producer and exporter, who is credited with having bought his former leader the support of several legislators to form his government at the Centre and in Punjab.
The inquiry reports and recommendations for effectively regulating the sugar trade were binned after a few months as the people forgot about the sweetener’s managed shortage, the spike in its rate, and the profits rigged by the millers and traders alike.
The current sugar price “shock” is also said to be temporary, and it is. People have already put it behind them. The reasons for the price hike may be legitimate or not. This so-called crisis isn’t the first one or the last.
It has happened before, and it will happen again, sooner or later, unless economic forces are unleashed to correct the market themselves.
The policymakers and even consumers know what needs to be done. There is no need to waste this space with repetitions.
No one is interested in implementing those solutions because that will deprive the politician-owners of the sugar mills of the opportunities to make windfall profits every few years.
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Source : DAWN
