LAHORE: The inconsistent policies of the current government have resulted in sugar exports being priced relatively low, while imports of the commodity are set at potentially higher costs, negatively impacting consumer interests.
The policy paradox -- exporting sugar when prices are low and then being forced to import it at higher prices to bridge the gap in demand and supply later within months -- directly translates into increased sugar prices for consumers. This is a critical consequence of a apparently flawed policy approach, creating a double burden for people: they first miss out on cheaper sugar when it is exported and then pay more for it when it is imported -- all within a gap of four months.
The true cost of sugar imports means consumers have to pay more. The intricate economics of sugar, a vital commodity for the domestic population, are laid bare when examining the stark differential between export and import costs. Recent estimates reveal a significant premium paid for imported white refined sugar compared to what the nation previously earned from its export. This disparity not only reflects the complex interplay of international market dynamics but also points to the unwise approach of the government.
By first allowing the export of sugar when prices were lower in the international market and now necessitating its import at a higher cost, the government’s policy decisions have put a considerable financial burden directly on consumers.
According to an assessment breaking down the mechanics of the landed cost for imported sugar, it emerged that consumers have to pay at least Rs30 per kg more on imported commodity than its export price. For instance, the international market price for sugar is hovering around $490 per ton, but a crucial factor pushing up the price is the premium demanded by sellers from certain regions. If suppliers are asking for a $70 per tonne premium above the London market price, the cost and freight (CNF) price to Karachi immediately escalates to $560 per tonne ($490 plus $70).
This jump underscores how regional supply-demand dynamics and logistical advantages can directly impact the country’s import bill.
Beyond the CNF cost, the final ‘actual landed cost’ in Karachi incorporates a multitude of other costs. If these additional charges amount to approximately $35 per tonne, the total cost spirals further. Therefore, the actual landed cost for imported sugar reaches approximately $596 per tonne ($560 CNF plus $35 additional charges).
This figure stands in stark contrast to the country’s sugar export endeavours in the recent past. If the country was exporting sugar at an average of $536 per tonne, the current import scenario reveals a financial disadvantage of roughly $60 per tonne. This $60 per tonne difference represents the additional burden placed on the economy and, crucially, directly on consumers, exacerbated by the initial policy to export.
The higher import cost, coupled with the previous export at lower rates, has direct implications for domestic sugar prices, translating into significantly increased costs for the end consumer. It also impacts the balance of trade and puts pressure on foreign exchange reserves.
Market insiders were of the view that understanding these calculations is crucial for policymakers aiming to stabilise domestic sugar prices and formulate more consistent and beneficial long-term strategies for sustainable sugar production and trade.
According to them, the current figures underscore the economic imperative for policymakers to reassess their commodity management to minimise reliance on expensive and arguably self-imposed imports.
