Every year during the month of Ramadan there is usually a shortage in the food commodities market In Pakistan due to excessive demand. This year the shortfall in supply is particularly acute in the sugar market. To combat this the government plans to increase the volume of sales of sugar through utility stores (subsidized government outlets) from 40,000 tons to 100,000 tons. However just driving past any of these stores is proof enough to convince a person that sufficient supply of sugar is not available.
As per a report in The Dawn, which cites the supply condition in Karachi, the stores are getting less supplies of sugar than usual and are unable to cater the growing demands of the consumers. The sugar price in the open market rose to Rs 55-58 per kg (when available) whereas the official selling price of sugar is Rs 38 per kg.
Hassan Khan remarks on the political angle to this crises on his blog:
Pakistan has approximately 80 sugar mills. Most of them owned by investors and politicians. Level of hypocrisy is that before ramzan, they have started stocking sugar and its price from Rs 38 per kg jumped to Rs 54. It always looks bad when you switch to Pakistani news channels but worst when such crises is on its peak and a minister is briefing press that due to increase in international prices of sugar, sugar prices are increasing in the Pakistan.
Sana Saleem says that the sugar shortage is due to a reduced crop production this year:
The farmers have reportedly blamed the mill owners of not providing adequate payments. Records state that the payments to the growers were delayed for more than eight to ten months. This discouraged farmers from sowing sugar cane and (they) opt(ed) for growing wheat instead to avail attractive incentives. Now comes time for manipulations by the mill owners. Not only are the mill owners accused of delaying payments causing a decrease in supply of about 15 to 20 percent as compared to last year, they have also hoarded large amounts of supplies. These supplies have been hoarded (conveniently) in order to create an artificial shortage in the market.
Bilquis, a consultant from Lahore, provides expert analysis on this issue at CHUP:
The current year saw a natural decrease in sugar production. In general, farmers, like others, only produce crops that give them maximum profit. In 2008-09, the current government increased the wheat (purchasing) price to Rs 950 (minimum price) to encourage farmers to grow wheat. This was an attractive incentive and resulted in attracting non growers to grow wheat (as it is profitable). As a result, sugarcane farmers switched to wheat production which resulted in a drop in sugarcane production.
Moreover, over the past decade, sugar cane production has declined because of the naturally difficult/negative constitution of the sugar market. Numerous specialists state that farmers have decreased the total area under production due to water shortage, behavior of the mill’s management, late payments, increased input cost, and diseases and rodent attack. They especially blame mill owners for late and/or no payments to farmers and limited irrigation water that make the farmers reluctant to grow the crop. Hence, these two factors have naturally reduced the supply of sugar by 15 to 20 percent compared to last year.
Right now, the Pakistan government is thinking of importing sugar from abroad to meet this shortfall. However, foreign traders of sugar such as Brazil and India have also raised their prices. So the price will not be coming down anytime soon. What happens in the next few days is critical as people are ready to come out on the streets to protest the sugar crisis.