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Political Influences Affect Pakistan Sugar Exports

10 July 2012
USDA Foreign Agricultural Service

PAKISTAN - Given current sugar supplies and prices in Pakistan, it would appear that the ECC decision to export 400,000 tons of sugar was based on political rather than market factors.

On May 15, 2012, the Economic Coordination Committee of the Cabinet (ECC) announced that they have authorized the exportation of 400,000 tons of sugar, which according to a recent Public Notice, will be completed in two phases.

The ECC made their decision after consultations with the Chairmanship of Federal Minister for Finance and Economic Affairs, as well as the Ministry of Industries; Trading Corporation of Pakistan (TCP) and other members of the Committee. The decision to export 400,000 tons of Pakistani sugar reportedly was based on political reasons rather than on normal market factors.

The State Bank of Pakistan (SBP) was mandated by the ECC to monitor the exports. Because the export of sugar remains restricted both in terms of quantity and class of exporters, the Ministry of Commerce issued a Public Notice instead of amending the Export Policy Order.

Government Facilitates Sugar Export

Moving forward, the Federal Board of Revenue has directed the Collectors of Customs to allow the exports of sugar based on the ‘Public Notice' issued by the Ministry of Commerce.

The Notice makes it mandatory for individual sugar mills (there are 84 sugar mills in operation in the country) to export a restricted quantity not to exceed 5,000 tons. The commodity would be cleared based on the ECC decision and Ministry of Commerce 'Public Notice'.

Potential for Sugar Price Increases

Sources in the Ministry of National Food Security and Research (MNFSR) reveal that the ECC decision to allow exports of sugar may result in an increase of sugar prices in the country. Commodity analysts reveal that sugar exports are not going to benefit growers or consumers as both will be at a disadvantage on this decision.

The growers have already sold their crop and already received payments from the sugar mills. Consumers are likely to suffer economically due to the possible increase in sugar prices.

Rise in Sugar Imports Expected

Pakistan’s MY 2011/12 (October-September) sugar production is estimated at 4.3 million tons. With the availability of 1.5 million tons as beginning stocks, total sugar supplies add up to 5.8 million tons, making for adequate supply on-hand.

Pakistan’s MY 2012/13 total sugar production is forecast at 4.1 million tons, down 5 per cent over the current year’s estimate. Sugar consumption in MY 2012/13 is forecast at 4.4 million tons. The decision to export 400,000 tons of sugar during MY 2011/12 is likely to affect ending stocks and resultantly will have a bearing on sugar availability during MY 2012/13.

According to commodity traders and market analysts, the new policy seems irrational because the country would require importation of even more quantity of sugar next year. Thus, the earlier import forecast will increase from 200,000 tons to 600,000 tons during MY 2012/13. The move may likely have repercussions on domestic prices of sugar in the later part of the year.

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