The Government of Pakistan has taken a firm stance regarding the export of sugar, with clear stipulations aimed at maintaining retail price stability. According to well-informed sources, the permission to export 0.150 million metric tonnes of sugar will be revoked if retail prices rise beyond the benchmark of the Sensitive Price Index (SPI) as of June 13, 2024, plus an additional Rs 2 per kilogram. This decision underscores the government’s commitment to preventing price hikes that could burden consumers.
The Economic Coordination Committee (ECC) has not approved the Ministry of Industries’ condition that required exporters to ensure export proceeds are received either in advance through banking channels or within 60 days of opening a Letter of Credit (L/C) for sugar export. The Commerce Ministry, which had previously refused to send a summary on sugar export, has yet to issue any formal SRO (Statutory Regulatory Order) to allow the export officially.
On June 13, 2024, the Industries and Production Division provided a detailed briefing to the ECC, following a series of meetings of the Sugar Advisory Board. These meetings, chaired by Federal Minister for Industries and Production Rana Tanveer Hussain, reviewed sugar stock data provided by the provinces and the Federal Board of Revenue (FBR) for the 2023-24 crushing year.
The Sugar Advisory Board’s analysis revealed that as of June 5, 2024, the existing sugar stocks stood at 4.213 million metric tonnes (MTs). The total consumption over the last six months of the current crushing year was 3.408 million MTs. The Board projected a similar offtake for the next six months, leaving an expected surplus of 0.805 million MTs by the end of the current crushing year on November 30, 2024. Consequently, the Board recommended an initial export of 0.150 million MTs of surplus sugar, subject to specific conditions:
The Pakistan Sugar Mills Association (PSMA) must provide an undertaking that ex-mill prices will not exceed Rs 140 per kilogram. Both ex-mill and market prices of sugar will be monitored by provincial authorities.
All export proceeds must be used to clear payments to farmers/growers, with provincial oversight to ensure compliance.
Any violation of the agreed terms would result in an immediate halt to sugar exports.
The Industries and Production Division proposed allocating the 0.150 million MT export quota based on past practices approved by the ECC in January 2023. This involves:
Provincial Cane Commissioners allocating export quotas within seven days of the Ministry of Commerce’s notification.
Exporters ensuring shipments within 45 days of quota allocation.
Export proceeds being received either in advance or within 60 days of opening the L/C.
The State Bank of Pakistan updating the ECC on export progress fortnightly.
No subsidies being provided to exporters by federal or provincial governments.
Quotas being distributed among provinces based on installed sugarcane crushing capacity: 61% for Punjab, 32% for Sindh, and 7% for Khyber Pakhtunkhwa (KPK).
During the ECC discussions, concerns were raised about the potential impact of sugar export on retail prices. The Industries and Production Division assured the forum that detailed consultations with the Sugar Advisory Board and other stakeholders confirmed sufficient sugar stock availability. They concluded that granting export permission would not affect ex-mill sugar prices.
However, tracking export proceeds to ensure they are used to clear payments to farmers remains challenging. Provincial governments are committed to safeguarding farmers’ interests, but the primary concern is to protect consumers by keeping retail prices stable. A proposal to export sugar in tranches of 50,000 MTs was discussed, with provisions to halt exports if prices rose, ensuring timely intervention by the Sugar Advisory Board.
After thorough deliberations, the ECC made the following decisions:
The benchmark retail price for sugar will be based on the SPI as of June 13, 2024, plus an additional Rs 2 per kilogram. The Sugar Advisory Board will monitor prices regularly, at least weekly, while provincial governments will also conduct price monitoring.
If retail prices exceed the benchmark plus Rs 2, the Sugar Advisory Board will immediately revoke export permissions.
The Ministry of Industries and Production will ensure quota distribution among provinces based on current year’s actual production.
Provincial Cane Commissioners will allocate quotas within seven days of the Ministry of Commerce’s notification, based on stocks as of June 5, 2024.
The condition requiring export proceeds to be received either in advance or within 60 days of opening the L/C will be deleted from the proposal.
