A thread on the sugar price hike. All facts taken from the recent report. Production in Pak declined from 6.6 million tons in 2017/18 (PLMN’s last year) to only 5.2 million tons. This reduction of 1.4 m tons in sugar meant there was no reason to export. @CMShehbaz @KhawajaMAsif

During PMLN tenure in 16/17 sugar production was 7.1 m tons and in 17/18 it was 6.6 m tons. The dollar was at Rs 105. So we allowed exports. After a 40% deval industry was getting a windfall and with reduction is production and prices rising there was no reason to allow exports.

Yet strangely both ECC and Cabinet decided to allow exports and very strangely Punjab govt even decided to give export subsidy. (No decision of ECC can be enforced without cabinet approval). There is a graph in the report that shows how exports increased local prices.

The price is stable at Rs 55 up to Nov/Dec 2018 but this was unacceptable to powers that be. Hence export was allowed and price started moving up. Then when price started to decline from Sept 19, again ECC & cabinet came to the rescue of the sugar industry & allowed more exports

The second time around in December 19 the govt really should have allowed imports but instead they allowed exports! Even ministry of industry and production opposed the export summary. So the price went up from Rs 72 to 79 between December 2019 to Feb 2020.

The issue is not the unwarranted subsidy of Rs 3 billion given to the sugar industry. The real issue is allowing of export that increased price from Rs 55 to Rs 80, when production was lower by 1.4m tons. The avg price over the 16 months is Rs 68 per kg & increase is Rs 13 per kg

The consumption of sugar is inversely related to price. With sugar prices going up, domestic consumption decreases. Assume 5 million tons of yearly consumption, monthly consumption is 417,000 tons. Thus monthly “gift” to the industry is avg price increase times this consumption

In 16 months covered by the report (Nov 18 to Feb 20) the extra money given by people to sugar industry is Rs 13 x 417,000 tons x 16 mo. This comes to Rs 87 billion. The extra transfer in March will be Rs 10 billion (price now is Rs 80). So the govt has gifted Rs 97 b to industry

This is a huge policy failure by the government. Huge. Two groups very close to the govt control 32.5% of the industry so they got at least Rs32 billion benefit. And of course this entire policy was approved by the ECC and the cabinet. So people can figure out who’s responsible.

Now some industry gossip: at the time exports was allowed many mills had sold out their stock not knowing if exports will be allowed. Only 3 business houses had stocks. No points for guessing who these business houses were.

Some political gossip: some anti sugar lobby ministers and officers in the govt had already leaked this report to the media before the govt had to release the report. @MalickViews @arsched can tell us if this is true.