The Pakistan Sugar Mills Association (PSMA) has once again petitioned the government to allow sugar exports, a recurring request that has historically led to price increases and subsequent emergency imports. On May 31, PSMA Chairman Chaudhry Zaka Ashraf sent a letter to Deputy Prime Minister Ishaq Dar, arguing that the industry is facing a crisis due to a surplus of 1.3 million metric tons, with total stocks at 7.9 million tons against annual consumption of 6.6 million tons. The association claims that mills are unable to service bank loans and farmers are awaiting payments, and that exports could earn Pakistan nearly $500 million in foreign exchange.
However, this argument echoes the one made in 2024, when the government allowed sugar exports. Retail prices subsequently surged from around Rs140 per kilogram to Rs190, briefly touching Rs210 in some markets. The government was forced to reverse its decision and import 750,000 metric tons to stabilize supply, offsetting the foreign exchange gains from exports. Market insiders note that when exports are permitted, mills divert stock to the export quota due to higher international prices, tightening local supply and leading to price hikes. Stockists also hold back inventory, and when the government panics and imports, the same players often profit from both sides.
Investigation Reveals Collusion
A Federal Investigation Agency (FIA) inquiry, ordered by the prime minister after the 2025 price surge, found that major sugar mill owners had colluded to create artificial shortages and inflate prices. Investigators uncovered fraudulent accounting and speculative hoarding, with several political figures identified as beneficiaries. Despite these findings, the cartel remained largely intact due to limited accountability.
The sugar industry's political insulation is a key factor in the recurring price hikes. Pakistan's 91 operational mills are concentrated among a few families with strong ties to major political parties, including the Tareen group, the Omni Group linked to the Zardari family, and mills associated with the Sharif family. Since 2003, Punjab has not issued new sugar mill licenses, effectively freezing competition while existing players expanded.
Previous Government Measures Backfired
Last year's export agreement with PSMA set a maximum ex-mill price at Rs165 per kg, significantly higher than the pre-export level of around Rs140, and allowed monthly increases. Critics argue this provided millers with a guaranteed price floor, potentially violating Competition Commission rules against collective pricing. The Competition Commission of Pakistan (CCP) had scheduled hearings for over 80 sugar mills on cartelization allegations, but progress has stalled. In 2021, the CCP imposed a Rs44 billion penalty on PSMA for price fixing and supply control, but the penalty was largely offset by the Supreme Court, and the matter remains unresolved.
Current Situation and Government Scrutiny
Now, mills are claiming an even larger surplus and warn that a record sugarcane crop next season could add nearly 2 million tons of surplus worth $1.5 to $2 billion. They argue that without export permission, farmers will suffer as mills lose capacity to pay fair cane prices. However, authorities are skeptical of the numbers. An official from the Ministry of Commerce stated that roughly 300,000 tons of previously imported sugar may have been included in the stock figures, reducing the actual exportable surplus considerably.
Ishaq Dar's cabinet committee has yet to meet, and its decision will determine whether consumers face another period of high sugar prices. History suggests that mills will likely get their export window, foreign exchange will briefly improve on paper, and ordinary households will bear the cost once again.
