Sugar import to spike import bill by $280m

ISLAMABAD: The government’s decision to import 0.5 million tons of sugar will spike the import bill by $275-280 million – 300,000 tons through Trading Corporation of Pakistan (TCP) and remaining 200,000 tons via private sector – but is unlikely to bring price down in the near future.

This was the consensus of an anecdotal survey carried out by this correspondent. According to market sources the government’s import decision will only stabilise the price of the sweetener at the current level of Rs 195-200 per kg rather than decrease it because the landed cost of sugar is projected to cost Rs 155 per kg.

Chairman Cereal Association of Pakistan Muzzammil R Chappal contended that the price of sugar has been stable in the international market for the last 8-9 months and hovering in the range of $560-565 per metric tons and the only hit the government will take is in the shape of tax exemptions.

Sugar import: privatising the profits, socialising the losses

The Federal Board of Revenue (FBR) has exempted Customs duty on the import of 500,000 metric tons of sugar, reduced sales tax rate from 18 percent to 0.25 percent and withholding tax to 0.25 percent on the import of the commodity by the Trading Corporation of Pakistan (TCP) and the private sector. The FBR has also exempted 3 percent minimum value added tax (VAT) on the import of sugar as well.

During the last meeting of the Economic Coordination Committee of the Cabinet the Finance Secretary had refused to waive off taxes or give subsidies. Credible reports suggest that the government did not bring the summary to the ECC and got it directly approved from the federal cabinet.

According to source in the Ministry of Finance there is no provision in the budget for this transaction and added that the Secretary Finance apprised the Cabinet that since the Government is under an IMF Programme, it has to apprise the IMF staff about this decision because it involves a large amount of tax exemptions and foreign exchange spending.

Deputy Prime Minister Ishaq Dar, overruled the decision of Ministry of Finance in the Cabinet meeting chaired by him. The cabinet subsequently vetted the summary moved by the Ministry of National Food Security, took the decision without discussing the matter as a regular agenda item and approved it through the circulation of the summary. The rules allow the disposal of cases through circulation.

The Competition Commission of Pakistan (CCP) has raised serious questions about the government’s planning and its handling of essential commodities. It noted that on October 11, 2024, the ECC permitted the export of 500,000 tons of “surplus” sugar. The decision was ratified by the Federal Cabinet, with conditions that included a mandatory production start by November 21 and a strict 90-day window for export completion.

As a result, sugar exports took place between November 2024 and January 2025, during which retail prices hovered between Rs 150 to Rs 165 per kilogram. In this meeting, Ministry of Commerce expressed its concerns arguing that allowing export of sugar will increase its price substantially.

Domestic prices have steadily climbed since then, peaking at around Rs 200 per kg in recent months. The sharp increase has triggered public outrage, with many accusing the government of mismanagement. Critics argue that export of sugar created an artificial shortage in the local market, leading to escalation in price and necessitating costly imports—an economic double whammy for the country.

The CCP noted in its August 2021 order that it had already cautioned against such policy cycles driven by industry influence. The order investigated the conduct of the Pakistan Sugar Mills Association (PSMA) and its members, examining whether collusive practices influenced export decisions and domestic pricing.

The Commission highlighted a troubling pattern in Sugar Advisory Board (SAB) meetings, where PSMA representatives actively pushed for exports even during ongoing crushing seasons. One notable example from 2012 shows PSMA warning that delayed export decisions could reduce profitability due to international market competition—despite abundant domestic supply and falling prices.

The CCP’s investigation further concluded that export permissions, while officially sanctioned by the government, were often lobbied for by the industry under the pretext of ensuring payments to farmers and clearing excess stock and noted that there was little evidence to support claims that exports did not impact on local supply or prices. In fact, retail prices remained high even during periods of zero exports — signalling that market manipulation could not be ruled out.

The Commission also ruled that the pricing structure in the sugar market lacks transparency, with significant gaps between ex-mill and retail prices and criticised the government for relying on industry-provided data without an independent verification mechanism, calling it a vulnerability that enables cartel-like behaviour and poor policy decisions.

Former chairman of Pakistan Sugar Mills Association (PSMA) Iskander Khan while talking to media said that the PSMA has nothing to do with Government’s decision to import sugar. He said all the sugar mills are well stocked to meet the needs of its industrial and domestic consumers. “We have stocks of around 0.5 million metric tons which are enough to meet the needs of the next 3-4 months and once the sugarcane crushing starts in November there will be surplus sugar available in the country,” he remarked.

“Sugar industry does not need subsidies or any other favours, it just needs the system of best global practice in place to do its business smoothly and professionally.”