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In a significant development, the federal cabinet of Pakistan has approved the export of an additional 100,000 metric tons of sugar, a decision that contrasts with Prime Minister Shehbaz Sharif’s earlier stance of withholding further exports due to concerns over local market prices and supply stability.
Cabinet’s Approval Process and ECC’s Role
The cabinet ratified the summary through circulation on September 25, a day when the Prime Minister was in New York, bypassing the regular cabinet meeting. This method of approval, though uncommon, is permissible under Pakistan’s Rules of Business, 1973.
The decision follows the endorsement of the Economic Coordination Committee (ECC), which on September 20 approved the Ministry of Industries’ proposal to export the sugar. Previously, the ECC had authorized the export of 150,000 metric tons. However, the Prime Minister had initially rejected a similar proposal in August, instructing a review of stock levels and domestic prices before allowing further exports.
Stocks and Market Dynamics
Last month, the government estimated that total sugar stocks stood at 4.8 million metric tons. The ECC projected that even after the export of 100,000 metric tons, approximately 704,000 metric tons would remain available at the beginning of the new crushing season. In Punjab, 89,000 metric tons of sugar were confirmed as surplus once reserves and consumption were factored in, based on assessments by newly appointed provincial officials.
However, the actual availability of sugar stocks remains contested. According to a Punjab-based sugar mill owner, a significant portion of the sugar is not disclosed in official records, raising concerns over tax evasion in the sector. The underreporting of sugar production has long been an issue, exacerbated by alleged discrepancies in stock reporting.
Political and Regulatory Shifts
The cabinet’s decision came shortly after the Punjab government transferred key officials handling the sugar industry. On August 29, Moazzam Iqbal Sipra was replaced by Ehsan Bhutta as the new Food Secretary, while Shoaib Khan Jadoon replaced Abdul Rauf as the Cane Commissioner. The timing of these appointments has raised speculation about their connection to the sugar export decision, especially considering the speed with which the new commissioner distributed export quotas.
The Punjab Cane Commissioner approved export quotas for 41 mills. 64,000 metric tons of the total export quota was allocated to Punjab, with significant shares going to high-profile mills. Hamza Sugar Mills received 4,357 metric tons, while Jahangir Khan Tareen’s JDW Sugar Mills was allotted 7,189 metric tons, reflecting each mill’s crushing capacity.
Market Price Concerns and the Prime Minister’s Previous Objections
Earlier in the year, when the ECC first approved 150,000 metric tons of sugar exports, the Prime Minister had linked the decision to the stabilization of local market prices, ensuring that they remained at or below Rs145 per kilogram. Despite this safeguard, retail prices recently exceeded this threshold, although the Pakistan Bureau of Statistics reported average prices at Rs139.5 per kilogram this week—below the specified benchmark.
The cabinet has now reintroduced the price-stabilization condition, with ongoing monitoring of local market prices. The threshold remains set at Rs145.13 per kilogram.
Connections and Favors in the Power Corridors
The swift approval of the sugar export quotas has raised concerns about the influence sugar mill owners wield in government corridors. Notably, several mill owners have benefitted from favorable policies in both the sugar and power sectors. Recently, the government made a Rs8.2 billion payment to power plants owned by five sugar millers to cover the cost of imported coal, despite the fact that many of these plants burn sugarcane byproducts to generate electricity.
Among the recipients were JDW, which received Rs4.1 billion, and Hamza Sugar Mills, which received Rs1.42 billion. The payments were part of the first tranche to sugar mills under a controversial decision by the National Electric Power Regulatory Authority (NEPRA).
Conclusion: A Controversial Decision
The approval of additional sugar exports highlights the delicate balance between managing local supply and supporting the sugar industry’s commercial interests. While the federal cabinet’s decision aims to capitalize on surplus stocks, it has drawn scrutiny due to concerns over market prices, stock transparency, and the influence of well-connected sugar millers.
As the new crushing season approaches, the government’s handling of sugar exports and market stability will remain under close watch, particularly in light of ongoing economic challenges and inflationary pressures in the country.
