The price of sugar, according to reports, has risen to as high as 125 rupees per kg in the markets of some cities. The GST on sugar, it is reported, has been raised to bring it at par with the tax on import stage. The Finance Minister has been pleading with the political leadership and the elite to start paying taxes. However, the governments, whether Federal or provincial, do not appear to budge to meet the rising demand for funds by the flood victims.
In Pakistan, attempts have been made to broaden the tax base through coercion as well as amnesty. Army has been used, under Musharraf, to undertake tax surveys. But the tax-to-GDP ratio instead of going up has come down. Why not try another option of giving incentive to broaden the tax base? Obviously taxing agricultural income requires a constitutional change. But offering lucrative cash prize to consumers against purchasing receipts can be tried. Other countries have done it. And, Pakistanis are no different. The crore-patti scheme of HBL for deposits or Saver Raffle for SAF games were a hit. Why not offer Rs one billion in prizes every month against vouchers on purchase receipts?
Coming back to price of sugar today: the price is not uniform across various parts of the country, which reflects the fact that the private sector knows there is shortage and is holding back stocks and the buyers are also aggressively purchasing. The Utility Stores Corporation (USC) is continuing to sell sugar at Rs 55 per kg which explains why there are long queues outside these state-operated stores and why the general public is accusing the USC staff of complicity in selling to private wholesalers and retailers rather than to the general public. A market distortion is clearly evident.
There is a consensus and it makes perfect economic sense from a theoretical standpoint to allow the market to set itself the price of sugar - a commodity that operates within perfect competition conditions in most countries whereby supply and demand determines price. The cost of growing sugarcane in Pakistan is uneconomical at present. This, however, does not mean that it cannot be made economical. The yield per acre as well as the sucrose constant needs to be improved. Further, the sugar industry needs to be incentivised to go for other by-products to make the whole chain more viable. Crying hoarse that politicians own sugar mills and they also fix sugarcane support price, when they are in government, is a hard fact we need to recognise.
For the government to play the balancing act, between producer and consumer is difficult. But if one recognises that market forces are the best determinant of price - then we have adhered to it. Calling them sugar mafia and cartels will not make much difference. At the same time, those in the Federal Cabinet who are also in the sugar trade need to be kept at arm's length in decision-making. Conflict of interest has to be recognised from within and not be pointed by others. 'The Ceaser's wife must be above suspicion' is a dictum that needs to hold true.
There is thus an emergent need for the government to focus on the rising socio-economic costs of simply living in this country. The heavy reliance on reducing subsidies to utilities, while support for the corrupt and inefficiently run state-owned enterprises like the National Insurance Corporation continues unabated, is beyond understanding. So is a rise in GST on sugar while the rich landlords continue to pay no tax on their huge incomes.