Hardly had the wheat crisis subsided, that the sugar imbroglio began brewing. The policymakers should have learnt a lesson, after being caught off-guard with the wheat uproar, and become proactive; but, as always, short-sightedness of regulators remains a lingering issue.
Recall when wheat shortage led consumers into difficulties during 2007-08, hoarding and smuggling were the main causes behind it - the same reason why sugar has become costlier today.
A significant portion of domestic sugar stock is lying in the warehouses with millers, who are waiting for prices to shoot higher. Moreover, there is also a potential threat of sugar smuggling to Afghanistan where per kilo price is nearly double.
The government does not have a clean sheet, either. With two million tons of sugar stock with the Trading Corporation of Pakistan and millers, the government should take concrete steps to ensure adequate supply to consumers.
That does not mean simply giving warnings to hoarders and promises to consumers. It means making real tough decisions and making them right now, because if these hoarders are left to their antics they will make hay next year as well, when sugarcane crop will likely be lower than usual. The country's 2009/10 sugar crop is expected around 3 million tons as against 3.2 million tons in 2008/09.
Had the government been proactive enough, it would have imported sugar back when the Economic Co-ordination Committee decided to do so in February and when international prices were hovering around 13.3 cents per pound. But TCP officials say, immediately after ECC's decision, they were told not to import the commodity for reasons not officially cited.
Now, when the mole has become a mountain, the committee has given its nod to import 75,000 tons of sugar. But then the move will not help ease the burden off consumers' pockets, international sugar price has now at its peak of 18 cents per pound. This means that landed cost of imported sugar will be around Rs60 per kg, as against Rs45 per kg had TCP been allowed to import five months ago.
On top of this, the government's decision to revise GST according to current ex-mill prices of Rs52 per kg will increase retail price further. Previously, GST was calculated on the ex-mill price of Rs28 per kg, despite the fact that prices were higher.
Ramazan is just a week ahead and the open-market price of sugar has already spiked nearly 20 percent to 54/kg; and if regulators continue to show their complacency the way they are, chances are prices will shoot to Rs60/kg as demand picks up in the holy month. Manipulators will then be dancing with joy, while those sweet-toothed children will be left without the sugary niceties they are so fond of.
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