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Is the on-going sugar crisis artificial?




  • THE issue of soaring price of sugar was placed on the desk of the President of Pakistan, the all powerful General Pervez Musaharraf, on February 7; the issue was then over a year old and had already attained unprecedented scandalous proportions because the price had at least doubled during the fiscal year.

    One has no first hand information on the brief presented to the head of the state but his response and the measures he identified for resolving the crises suggest that the briefing could not have been accurately depictive of ground conditions.

    Apparently, Pakistan’s uniformed ruler was given an easy to comprehend explanation of developments leading to what has become one of the worst food related shortage scandals in a country whose history is replete with such scams.

    The President ordered action against sugar hoarders and issued instructions for ensuring that the public’s requirements are met at any cost. The escalating price of sugar cannot be attributed simply to hoarding though admittedly hoarding is a component of the crises.

    It has been hoarding of a totally new kind because the main agency involved in keeping stocks away from the market when they could have been used for stabilizing rising price was state-owned. It could only have allowed elements specializing in exploiting human needs and giving black marketers a free run of the show under the instructions of the government.

    The culprit in this case is the Trading Corporation of Pakistan (TCP) that has stocks of refined sugar of about 200,000 tons. They could have been used to control the situation. These stocks had been purchased from sugar mills to provide them relief and enable them to off-load excess produce. This isn’t something from the distant past but an event that took place only last year.

    The idea was that the sugar mill owners had been going through a difficult period and needed to be bailed out. What makes an industry producing in excess of market’s demand eligible for state support and resources of the national exchequer are anybody’s guess but this is exactly what had happened.

    Many sugar mills of the country were thus provided financial assistance by the government in a situation that was not the responsibility of the state. The decision was clearly a case of the state’s backing for a resourceful segment for the exploitation of national resources and rake off operations against the general public.

    Purchase of stocks from sugar mills providing incontrovertible evidence of the government backing, mill owners has been one factor in the building of the current sugar price crises; another has been mill owner’s reluctance to pay growers for the supply of cane. In this case too, the government is seen on the mill owners side of the fence.

    This isn’t a problem dating to the present regime or of its creation but an inherited one from the period when rulers felt that setting up a sugar mill was a vehicle for making high profits. As a result, sugar mills were established all over the country, particularly in Punjab province and the owners of many of these mills treated cane growers with contempt because the farmers were helpless before them.

    Laws protecting the interests of growers very much existed. They were strict to the extent of authorizing the district magistrate to arrest defaulters. But the officials could not move to implement laws because civil servants have, by and large, subscribed to caution-to be read refusal to use authority when that could put them in confrontation with the higher authority. No action was consequently taken against millers defaulting on payment to growers.

    The payments piled up and reached millions of rupees. When the government changed, many of vested interest elements from the sugar industry had no hesitation to team up with the new set-up to save their skin. As for laws protecting farmer’s interest, I am not sure if they are still on the statutes because the so-called devolution of authority has installed institutions that do not cover the full ground. The office of the District Magistrate has been eliminated and its powers have not been allocated to any other office in many cases. The grower has nowhere to go now.

    While purchasing the excess stocks from mill owners and making delayed payment to growers or paying them just enough to ensure that they accept the continued suffering have been bad enough aspects of the sugar industry, its worst contribution has been delayed crushing, an issue that crops up practically every year. The regrettable aspect of delayed crushing is its negative impact on the wheat crop that replaced it in many fields across the country.

    The overall produce of the main food crop is undermined by the sugar mills policy of late start of the crushing season. The government should have been taking strict notice of this situation but the best that is done is holding negotiations with millers and ultimately accepting their point of view to the detriment of the wheat crop and the national interest.

    All these factors have contributed towards creating a crisis of shortage of the commodity and resultantly its rising price. However, these factors did not fall in line automatically and were manoeuvred towards a specific end by a plan jointly managed by elements that should have been working to control the price escalation and meet the shortage of the commodity.

    An effort was seemingly made to reduce the demand-supply gap by importing sugar last year. The TCP opened tenders for importing 50,000 tons of sugar in August 5. The organization was reported to have plans for importing 300,000 of sugar and contracts for the import of the bulk of that quantity were made towards the early part of the current fiscal. In addition, sugar mills made contracts for importing 400,000 tons of sugar by August last year and 22,000 tons sugar also reached Pakistan from China by that time.

    According to the official count, Pakistan needs about one million tons of sugar to bridge the demand supply gap. The above quantities plus stocks with the TCP should have been sufficient to meet any shortfall but they cannot if the commodity is not released in the market. This can be summed up as a plan for allowing rise in the price of sugar. The crises, it appears, is man- made – the result either of mismanagement or even more deplorable reasons.

    The latest move to resolve the crises is a strange one. Supply to the Utility Stores has been doubled with a view to providing relief to the public. The Utility Stores are selling sugar at Rs27 per kg while it is being sold in the market for Rs42 for the same quantity. Can a commodity be sold at two different prices with creating additional problems? The answer is in the negative. In any case, a price difference of Rs15 is unheard of and, to the say least, is not natural.

    Also to say the least, the sugar crisis is artificial.

    Courtesy: The DAWN

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