No news is good news - at least when it comes to the sugar industry of Pakistan. The last few days of 2010 were happily going by without much being said about the sweet commodity. But the very last week of 2010 revealed a news item that made many shift in their seats and question the rationality of suggestions, if any existed, that is.
The Pakistan Sugar Mills Association (PSMA) demanded that sugar from India be put up on the negative list of imports on grounds that this will seriously affect sugarcane growers and the entire industry in general.
What an irony! This stipulation comes from an industry which had seen one of the most astonishing price hikes at the retail level because of the failure to conduct prompt imports of the commodity, only a few months ago.
India, the worlds second largest producer of sugar after Brazil, is likely to produce over 23 million tons of sugar this year, more than 20 percent greater than what it produced last year. Consequently, the Indian traders have been looking into export prospects; international media has cited Indian government officials indicating that the country can export as much as 1 million tons of sugar in 2010-11.
Currently, Indian sugar futures are trading at around INR30 per kg set to mature on January 20, which translates to roughly Rs60 . In Pakistan, sugar is being sold at around Rs80 per kg at the retail level.
While production estimates for 2010-11 are still a tad vague, the expected output numbers hover in the range of 3.3-3.7 million tons, less than the annual requirement of 4.2 million tons for Pakistan.
Given that the expected output is lower than the average demand of sugar, even by optimistic conjectures, one can expect that come the latter half of 2011, talks and tussles over sugar imports will be inevitable.
It makes sense for the policymakers to be proactive about this issue and facilitate the import of Indian sugar now, when it is available at cheaper rates. And especially since India will be locking in deals by the first quarter of 2011, according to Reuters, it will be only better to take this step now.
The fiasco ensuing, when sugar imports are procrastinated upon have been witnessed in the country in recent years.
As for undoing the benefits to the growers, representatives in the sugarcane growing industry said to BR Research, "This is just rent-seeking behaviour from the millers who do not want cheap Indian sugar to enter the market and spoil their profit-making opportunity. As for us, we do not want their sympathies!"
Its not like India has a lot of stock to export anyway. With government officials citing exports near 1 million tons, and Pakistans expected shortfall in the range of 0.5-0.9 million tons, how much of the Indian sugar can possibly flood the local market?
If the officials are not convinced even then, a limit can be imposed on the quantity that can be imported from the neighbour, just as an export limit on wheat has been put in place.
Its about time officials quit acting like ostriches, and operate proactively to prevent yet another sugar crisis.
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