Sugar prices have been making headlines as much as they have been causing pain to household budgets. Open market prices for a kilo of "white gold" have been climbing steadily - hitting Rs68 -70 in recent days.
It isn as if the government is doing nothing to placate consumers. After a nod from ECC, Trading Corporation of Pakistan has recently imported 50,000 tons from a Dubai-based supplier. It has also opened tenders that are due to close near the end of the month.
Pakistan is the third largest consumer of sugar in Asia. Sugarcane is also one of the major cash crops of the economy. Commodity experts believe that average production of sugar in the country is about 4 million tons per year.
Consumption of sugar in the country is also around the same mark. Yet, every year significant quantity of sugar is imported to meet domestic requirement. Wonder why?
Apparently, smuggling and hoarding are the major culprits. Sugar, unlike many other sectors in Pakistan, can be regulated fairly easily - only if administrators get their act together to curb artificial shortages and check price fixing.
Starting from the downstream segment, regulators need to guarantee the price to sugarcane farmers, and at the same time working out a system to ensure adequate transfer pricing within the value chain.
But thats the long end of the solution. The way out in the immediate term is timely import.
Shortage of sugar in domestic markets is currently estimated at 1.2 million tones. This number may be revised in either direction, once production numbers from PSMA are made public in a few days.
Fortunately, global sugar prices are at relative lows, thanks to the arrival of Brazilian sugar in international markets and a slowdown in demand from India. At the moment, sugar is being traded at $547 per ton - its lowest in many months - from a high of $767 per ton at the beginning of the year.
So far, the TCP has acquired about 150,000 tons. Executives at the state-run trading organization reveal that they have been mandated to raise 500,000 tones - well below the expected shortage - for which tenders have already been floated.
TCP officers expect to fill their current mandate by the end of this month, but unless the ECC gives them a go ahead for more, their hands are clipped. And, if ECC delays its decision any further, sugar import would be costlier as global sugar prices are expected to start heading northwards again.
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