Bitter sugar pill

The sugar price in the country is likely to surge by Rs85 to Rs90 by next month as large quantities of the commodity is being smuggled to Afghanistan and Iran.
For the last two months, sugar is being smuggled to Iran where the retail price of the essential commodity is around Rs110 per kilogram against the current market price of Rs75/kg in Pakistan, sources in the sugar mills told Pakistan Today. Rejecting the claims of government officials that sugar was not being smuggled, sources said that smuggling of sugar was a troubling issue which was taking place due to high price margins in the neighboring countries like Afghanistan and Iran. Sugar in Afghanistan was available at the retail price of Rs105/kg while the same commodity across the border in Pakistan was available at Rs75/kg with the price difference of Rs30/kg. The huge margin in price is leading to the smuggling of the commodity. The illegal trade of sugar has drastically increased since smuggling to Iran has started during the last two months, they claimed.
The illegal traders were easily pocketing around Rs1.0 million on each smuggled truck while making Rs50 million profits daily through unofficial trade. Each truck contains almost 200 bags of sugar or around 2200 tonnes. As mills start production in the end of November, a major stock of the commodity has already been smuggled during the holy month of Ramadan, therefore a shortage of sugar and hike in prices is looming during the coming months and the crisis may go on till the end of November 2011, they claimed. The sources revealed that the stock would not be enough in the country saying that claims of providing sugar at minimum and fixed price especially in Punjab has also proven untrue as the commodity was being sold at over Rs70/kg. However, the sources said that there was no smuggling of sugar to India from Pakistan as sugar was cheaper in India.
It is worth mentioning here that a tender for procurement of 50,000 tonnes sugar of Trading Corporation of Pakistan (TCP) was scrapped for non-participation of members of Pakistan Sugar Mills Association (PSMA) in the process as the lowest rate fixed for the tender was not acceptable to them. Though the millers, earlier, had demanded procurement by government to maintain the required stock and also facilitate them for making payments to the growers but the delayed response and the fixed maximum rate for procurement left them with no option but to avoid selling sugar to the government. Since last month, the retail price of the highly consumed commodity has increased to over Rs75/kg from Rs65/kg in June and July this year making over Rs10/kg hike in the local market. The price, sources claimed, was likely to jump to Rs80/kg shortly and it is feared that it would go to Rs85 to Rs90/kg during next two months. However, at the government level, the ex-mill price was Rs60/kg, with 8 per cent FED at Rs4.80/kg. Ex-mill price was Rs64.80/kg; wholesale Rs65.80/kg, retail Rs66.80/kg. Therefore any increase in price above this is unwarranted. According to government statistics, approximately 1.6 million tonnes sugar was available on 10th August 2011.