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PR Short Notes


Photo Source: Dawn

Pakistan Reader# 345, 11 May 2022

Pakistan’s Sugar Crisis: New government, Old issues



Temporary measures on sugar export will not address the existing sugar crisis in Pakistan

Abigail Miriam Fernandez

Prime Minister calls for zero tolerance
On 9 May, Prime Minister Shehbaz Sharif announced a "complete ban" on sugar export due to "domestic demand." He said, "Given the domestic demand, I have ordered a complete ban on the export of sugar. There will be a [sic] strict action against smuggling and hoarding. Absolutely zero tolerance [will be shown] for those found negligent in their duties." Additionally, the Prime Minister's Office stated that the PM has directed for first meeting the demand of people and stabilizing the price of sugar and has asked the departments concerned to keep him informed about the implementation of his orders.

Earlier, Shehbaz Sharif directed the Utility Stores Corporation (USC) to reduce the rates of sugar and flour to provide relief to people during Ramazan. This came after consumers’ complaints about the shortage of sugar and flour at utility stores; they complainedthat store administrations were conditioning the sale and purchase of oil and sugar with other items, and not providing single items to consumers. However, while speaking to Dawn, the USC spokesperson Sajid Rehman denied the allegations. He claimed that the shortage of flour, sugar, and oil was temporary due to the rush at the stores. He also claimed that the supply of three to four items was sent to the stores daily and that the issue would soon be resolved. 

The ban: A temporary fix for profiteering and hoarding
The ban on sugar export is a temporary fix to address the larger systematic issues in the supply chain. Pakistan’s current crisis stems from the fragmentation of its sugar sector. It starts from the cultivators and moves up to the millers, wholesale distributors, retailers and the government who want to follow their own regulatory policies. 

While the government fixes the price of sugar cane, the finished product (sugar) is sold at the ‘market rate’ to wholesale dealers. This system creates significant distortions in the value chain. This is sustained through a 40 per cent duty on the import of sugar in Pakistan which is borne by the consumers. It was highlighted in the sugar commission report;  the latter revealed the nexus between these owners and various government officials, which to unregulated practices bypassing laws and often exploiting the farmers.

The inability of the government’s policies to minimize the space for allowing market players to periodically create artificial shortages to rig profits and raise their prices is one of the main causes of the crisis. According to an editorial in Dawn, several studies have highlighted that the excessive regulatory and financial state interventions in the sugar markets in efforts to protect the interests of small-holder farmers and consumers have been the immediate causes for the eruption of periodic shortages. Additionally, it states that frequent government interference in the market has made the product internationally uncompetitive. This further created opportunities for large farmers, millers and others to manipulate economic rent at the expense of small producers and poor consumers.

The sugar industry in Pakistan is not only highly politicized but is already ridden with corruption. While the reason behind the soaring price and shortage of the commodity is known, the solutions taken to address the issue have only been cosmetic, thus yielding no results. 

References
PM Shehbaz imposes ban on sugar export,” The Express Tribune, 10 May 2022
PM Shehbaz imposes 'complete ban' on export of sugar,” Dawn, 9 May 2022
Aijaz A. Nizamani, “Left with a bitter taste,” Dawn, 3 January 2022
Wheat, sugar crisis,” Dawn, 21 March 2021
Tahir Sherani, “Federal govt orders formal investigations, action against 'sugar cartel',” Dawn, 27 July 2020
Khaleeq Kiani, “Bitter sweet facts,” Dawn, 27 December 2021
Khaleeq Kiani, “Ministerial body proposes major reforms in sugar sector,” Dawn, 16 December 2021

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