EDITORIAL: Contrary to the widely-held belief that players within the sugar industry are some of the most influential and powerful people with access to the power corridors, the efforts by the sugar millers to export their surplus stocks before the next season for cane crushing commences are facing headwinds.
It seems their pleas for permission to export another 850,000 metric tons of the commodity in two phases is falling on deaf ears in the ministry of industries and production, which is reportedly refusing to even “consider the proposal” until the domestic market prices stabilise.
These are telling signs, since they show that the government is bracing for public pushback that is bound to come after IMF’s taxes inflate bills and stoke cost-push inflation. And any price increases, especially in high-demand items, such as sugar will not just make for very bad optics; in the present environment it could even stoke angry protest.
But there are some problems with the way the government is handling some sectors, especially sugar. It’s already linked sugar export to Rs2/kg retail price increase; meaning exports shall be halted if sugar price rises by that much in the country.
The industry, however, quotes the increased taxes and duties it must now pay to make a case for increasing that threshold to Rs15/kg. It also cites its surpluses and the small window to export it before the next season begins to demand export rights.
Surely, this is not a problem that cannot be solved. The government should know exactly how much surplus the industry really has. If it hasn’t already physically audited stocks, for some reason, then it must do so immediately to get a perfectly clear picture of available supply.
Once the surplus is verified, export can be allowed in phases. It will have to monitor the local market at all times, of course, and step in immediately if prices begin to rise. And if Rs2/kg is indeed a little too tight, the government – which imposed all those duties and taxes that the industry is crying about – can easily calculate a more realistic differential.
Such matters require meticulous planning. That’s why it is already surprising that the government does not have full-time on-ground knowledge of available stocks of important commodities, and has to take the industry’s word for it with a lurking suspicion that it may be taken for a ride. Perhaps this sector, in particular, can be better organised and audited the issue of allowing sugar export resolved.
We have now come to the point where pricing inefficiencies can no longer be tolerated. The government has already disappointed by discriminating tax policy against salaried, middle and lower-income classes. Adding insult to injury by piling more misery on them because of out-of-control retail commodity prices, that too because of incompetence, might even trigger much wider social and political unrest.
With so much going on, issues like exporting possible surpluses should not take more than a meeting or two at the highest level. Hopefully, the government will not only settle this matter very quickly, but it will also establish a permanent framework for dealing with such issues.
It must, above all, ensure that it always has complete knowledge of available supply of all essential commodities. This is the most essential aspect of ensuring price stability, especially when inflation is such a big concern. Otherwise, it will always find itself behind the curve.
Copyright Business Recorder, 2024