From all available indications, as noted in a Business Recorder report from Islamabad appearing on February 1, the government's bid to arrest the increasing trend in sugar prices from duty-free import of raw sugar has proved to be an exercise in futility. For, ex-factory rates in Sindh and Punjab, as on January 31, stood at Rs 25 and 25.50 per kg, respectively, thereby raising retail market prices in the range of Rs 26 and 27 per kg, the highest since 1999-2000. As such, market experts' fears of further escalation in coming days can be seen as substantiated by the reported increase in the prices of 100-kg bag at an average of Rs 50 per day.

Reference, in this regard, has been made to an expert's observation that the soaring trend during peak production season (November-March) unmistakably points to further increase in the prices at the end of crushing season, a prospect which has been, understandably, described as quite alarming.

It will be recalled that, evidently intrigued by the disquieting upsurge in retail prices of sugar, the Economic Co-ordination Committee (ECC) of the Cabinet in its meeting last December, deemed it expedient to allow duty-free import of 0.2 million tonnes of raw sugar to avert a major crisis. However, as it was then explained, in arriving at that decision in the midst of abundant availability of locally produced sugar from the ongoing crushing operations, the ECC found itself left with three options to choose from, and without waiting any further for things to improve. Needless to point out, the urgency to deal with a dangerously developing situation arose from the need to halt the ascending trend as the prevailing rate of sugar for consumers had risen to Rs 24 per kg, the highest recorded until then in the last three years.

This could be done through different approaches, namely, duty-free import of refined sugar, duty-free import of raw sugar, and release of the government's own reserve stock in the market. After deliberating upon the pros and cons of the three options, the ECC decided in favour of importing raw sugar, in the first instance, leaving the other options to possible use later, if and when the situation so warranted.

Now that the raw sugar import has failed to influence the market sentiment, as will become evident from unabated increase in sugar prices to unprecedented high levels, time has certainly come to consider the other options. It will also be noted that market experts have attributed the recent increases to speculative tendencies arising from a number of factors, including the opposition of the sugar mills to the import of raw sugar from the very launch of the scheme. As such, it will, perhaps, be in the fitness of things, to alter the ECC's scheme, and start with immediate release of the reserve stock with the TCP, while continuing with the programme of importing duty-free raw sugar. This will certainly have its impact felt on market sentiment and guard against future rises.

Copyright Business Recorder, 2005