Inside Financial Markets
Industry to challenge sugar price of Rs89.5 per kg - Inside Financial Markets

Industry to challenge sugar price of Rs89.5 per kg

Following the court’s permission, the federal government on Saturday fixed the price of sugar yet again, putting its credibility on the line and risking another round of legal battle with the industry.

As per the official notification, which the provinces are told to implement, sugar will now be sold at a retail price of Rs89.5 per kilogram.

According to an earlier notification dated July 16, the government had fixed the price at Rs88.24 per kg, which the industry had challenged, and is threatening to do so again. The industry’s spokesman told Dawn it would go back to court on Monday.

Reacting to the latest notification, various stakeholders state reasons for doubting the whole process. Food department officials think the federal government had gone soft on millers by considering average (sucrose) reco­v­­­ery figures otherwise the price should not have gone beyond Rs80 per kg.

Whole-sellers believe no miller will follow decision

The dealers think they will be stuck between the devil and the deep blue sea: the millers will not sell it at the stated price and dealers will either get arrested for selling at a higher price or quit the business (they claim 60 per cent of them have already gone out of business). The retailers fear the worst: “We will get sugar at higher prices and be fined or arrested for selling it at the purchase price.” The consumers doubt the government has the resolve and wherewithal to get the decision implemented.

Talking to Dawn, a spokesman for the industry lamented that it is a “planned effort to kill the business. They better nationalise it instead of planning its murder. During the last crushing season, the industry wrote to every minister, politician and officer concerned, saying that cane prices have gone up. They should either act to ensure indicative price (Rs200 per maund) or get ready for high sugar price. Each one of them wrote back that it is a free market and they cannot interfere. Rather, the entire government (the prime minister included) claimed credit in countless TV talks for ensuring higher income to the cane farmer. But that was then. Now, it is neither a free market, a matter of de­­m­and and supply nor a matter of remembering high prices for farmers. The in­­dustry is unilaterally declared the cul­prit, a rough business concern, which needs to killed, both financially and administratively”. He did not wish to be identified because he is part of the leg­al reaction the industry is firming up.

A Punjab food department official points out that the province, its research institutes and mobile laboratories had calculated 10.41pc sucrose recovery in the first week of November last year. It had only gone up later as cane matured further. All those calculations are part of record and can be referred to. However, the federal government averaged it at 9.9pc. Had that 0.5pc addition been factored in, the official price calculation would not have gone beyond Rs80 per kg. The federation has, in fact, taken a lenient view, the official thinks.

Asghar Butt, a whole-seller in a ma­­jor city market, is not optimistic either. “With this government, the question is never of intentions, but implementation. Take it from me, no miller will fol­­low the price set by the governm­ent. It will instead create chaos. Since millers have political muscle as well, the entire implementation focus will shift to dealers and retailers. What choice will they have? Either risk ad­­ministrative brunt for selling at purch­ase price or absorb losses on daily bas­is or stop selling the commodity. Let’s see which route we take, but one thing is certain: this decision will not work.”

The mills dealers (connection between mills and market) are not hopeful either. Seeking anonymity, one of them says: “Millers are united, but dealers are not. Since the so-called [joint investigation team] was formed and submitted its report, who have been arrested the most in the entire supply chain? The dealers! How many mill owners have been arrested?”

Syed Zaki Hussain

Add comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

The Canadian Securities Institute


CSI is part of Moody's Analytics Learning Solutions, which offers educational programs and credentials throughout the world.

Email Newsletter

Subscribe to receive inspiration, news, and ideas in your inbox.

Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)