An business article in Dawn last week explored the sugar crisis afflicting Pakistan during this year’s month-long Ramadan holiday. The government’s decision to increase the per kilogram price of sugar to 55 PKR ($0.68) from 36 PKR ($0.42) has generated a huge political uproar. A 1 million ton shortage has led to hoarding, panic, and rationing.
Although consumers usually expect prices to increase during the month of fasting, the commodity’s dramatic rise has caused ire towards politicians and sugar mill owners. Anita McNaught of Al Jazeera English reports on the sugar shortage during the holy month of Ramadan when sugar and sweets are such an important part of life.
Sana Saleem is a 21-year-old Pakistani working for a British publication in Karachi. In her analysis of the sugar crisis, she points out:
The ritual price hike before Ramadan starts is quite normal and expected. Every year a massive price hike is seen in food items and various goods just before the start of Ramadan. Quite interestingly, this is justified as a ‘business tactic’ to get maximum profit at the time people are bound to store in food items. Ironic but true. However, the recent price hike in ‘sugar’ prices has been termed as a ‘Sugar Crisis’ by Pakistani Authorities and media outlets. If inquired regarding the sudden increase in prices the local stores point fingers at the lack of supply and an increase wholesale rate, which is then directly affecting the retail market. So how does one figure out the sugar imbroglio? A significant raise in prices -up to Rs.20- just before the peak consumption time seems absurdly convenient.
Changing Up Pakistan is written by the head the social investment wing of ML Resources, a small private investment firm. The author gives a very thorough explanation of the natural and artificial causes of the sugar crisis:
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 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.
Moreover, in the International Market, Brazil and India are the biggest sugar producers in the world. In 2008-09, these two producers faced adverse weather conditions that resulted in a natural reduction in the global supply. Hence, the global price of sugar sky rocketed as well.
Prior to Ramadan, like any other year, wholesalers and mill owners have been accused of hoarding sugar. By limiting supplies, they artificially created a shortage. The main reason is profit. Mill owners buy sugar cane before December because crushing season lasts four months (December to March). Approx 38 to 40 lakh tons of sugar cane is crushed (this is the whole annual supply). The processed sugar is then kept in warehouse or sold to wholesalers. Hence, these mill owners and wholesales are key suppliers and have a monopoly over supply and thus control prices. As they are aware of higher demand before Ramadan, they deliberately withhold supply to manipulate higher prices and profits and hence artificially reduce the supply of sugar in Pakistan.
Another Pakistani blogger, Hassan Khan, writes in his Sugarphobia post that a cabal of business and political interests are colluding to generate maximum profit from the current economic turmoil:
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 a 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.