The sugar standard was set, on the demand of sugar millers themselves, by Pakistan Standards & Quality Control Authority (PSQCA) after due diligence and testing according to international standards. The demand of sugar millers at that time was motivated to block the entry/import of cheaper Indian sugar which was casting shadow on the profits of the local sugar millers with higher sale prices against the cheaper import prices.
The philosophy of the sugar millers to seek standardisation of sugar at that time by PSQCA was to oppose the import of Indian sugar through applying Technical Barriers to Trade (TBT). The imported sugar from India was contested by the local millers to be not as per conformance of the PS standard.
The application of PS standard becomes mandatory, if it is listed under the items of mandatory products, regardless of its origin, for conformance with PS standard before being allowed for sale in domestic market. The 83 mills' club of sugar millers during the last year had made a forceful lobbying in various ministries and ultimately the pressure on the Ministry of Science & Technology had resulted in initiating dialogue for making sugar a produce of compulsory items list, to stop the imports by applying TBTs.
Out of 83 sugar mills, only 63 had obtained licences for offering themselves to the conformance of the standards. Later, the licensees forced the PSQCA to scale down the charges for using PS mark which was agreed to by PSQCA at very nominal fees for qualifying for sale of sugar in domestic market after having been tested as per PSQCA standards. The sugar has to qualify to the national standard as to the ingredient levels to be within the tolerance limits not to cast adverse effect on the health and hygiene of human beings consuming the sugar.
Various levels of different ingredients of chemistry include the approved level of International Commission for Uniform Methods of Sugar Analysis (ICUMSA) from 60 to 80 as per Pakistan Standard. The ICUMSA level above this would render the sugar as substandard.
The local sugar, tested by various laboratories did not conform to the PS standard. (Records are available in the PSQCA). Sugar millers were interested only in putting the TBT operation for imported sugar due to mandatory listing to block the imports of Indian sugar by subjecting it to rigorous tests in Pakistan before it is allowed sales in domestic market competing the sales of domestic sugar. The sugar millers ignored the fact that mandatory listed items chase the domestically produced goods equally as it chases similar imports. Both have to comply with the standards before they are allowed sales in the market for human consumption and use.
Interestingly, sugar millers have neither got their licences renewed nor are interested in subjecting their sugar to the tests for qualifying for sale in the domestic market, and have no interest in conformance to standards of local sugar either.
The only plausible answer to this situation appears to be that now the millers' intention is not to block imports because the import value of sugar has been rising from $450 per ton to $600 per ton. This places the local millers at advantage as they can sell the sugar at prices of imports comfortably calling it 'price determination by market forces'.
The millers during the crushing season were valuing their sales below Rs 30 per kg. Hoarding of sugar and getting the extension in payback of loans further provided them strength of holding and hoarding. Meanwhile, the price of sugar also started picking up internationally due to uptake of more than a million tons import of sugar by India for building strategic reserves meeting the consumption due to shortfall of domestic production in India.
The Trading Corporation of Pakistan (TCP) acts as intervener and makes market interventions by releasing strategic reserves to depress the intended higher value sales by the domestic millers. TCP did not make any purchases for strategic interventions during 2008-09. The millers held the stock of 1.3 million tons during August which should be sufficient up to the coming crushing season during November based on 300,000 tons a month consumption of the country.
TCP has no strategic stocks to control and stabilise the prices. State Bank allows extension in payback of the borrowed money on hypothecation of sugar stocks by millers. The possible colluding role of TCP to create an open space of cartelisation and price manipulation cannot be ruled out, said an analyst.
One consumer interest group questioned the extension of repayment of loans by sugar millers and said that the collusion of all the parties does establish that price stability of sugar is the last option and personal interests are the first option. The wait and allowing the international prices to rise with no strategic reserves to give the millers chance for windfall profits all went in possible collusion and connivance in which the extension in repayment of loans is an example to support the hoarding to finish in higher cost of sales by local millers in internationally sugar price increase scenario.
The sugar, intended to be sold by the sugar millers, is not in conformance with the standard. Thus substandard sugar would be sold at international market price of standard sugar. The standard which was issued in consultation with the sugar millers restricting the ICUMSA from 60 to 80 was asked to be changed up to 100 by millers but it was declined by the OPSQCA. This shows that the local sugar does not meet the laid down criteria of certification to conform to the standard before sales which is mandatory in the interest of human consumption.