The Government of Pakistan has taken the decision to import 100,000 tons of sugar from Brazil in the upcoming month of September. This decision follows attempts to control the issue of smuggling, which have had limited success. Court interventions, including the blocking of government efforts to regulate retail prices, have contributed to the ongoing challenges related to smuggling.
To carry out this import, the Trading Corporation of Pakistan (TCP) has engaged with the Pakistani Trade and Investment Counselor in Sao Paulo, Brazil. The objective is to explore options for procuring white refined sugar from Brazil. Given Brazil’s status as a major global sugar producer and its past history of supplying Pakistan with sugar, the government is considering either a government-to-government (G2G) transaction or involving the private sector for procurement.
The TCP has officially requested the trade counselor to establish contact with potential sugar suppliers in Brazil to secure the supply of 100,000 metric tonnes for delivery to Pakistan in September 2023. The Executive Director of TCP, Riaz Ahmed Shaikh, conveyed this request in a letter to the Trade and Investment Counsellor in Sao Paulo, Waqas Alam. Shaikh also shared details of potential companies for both G2G and private sector arrangements.
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This move is interesting given that the government had initially allowed the export of sugar in late 2022, with the export limit being expanded to 250,000 tons in January. However, as of June 2023, nearly 215,000 tons of sugar had been exported, and this trend continued in July until the government finally imposed an export ban.
Experts have expressed concerns that many sugar mills had already oversold their stocks before the start of the crushing season. This situation is expected to worsen, and the delay in imposing the export ban has allowed illicit traders to smuggle out large quantities of sugar to neighboring Afghanistan, where they take advantage of the price disparity.
The consultant mentioned that domestic sugar prices have risen significantly in a short period, with projections of further increases by September. Retail prices have also surged, and it is anticipated that sugar could breach the Rs. 200 per kg mark in the near future.
Internationally, sugar prices have risen substantially due to factors such as reduced production in major sugar-producing countries like Brazil, Thailand, India, and China. The disruption caused by the El Niño weather system, leading to droughts in certain regions, and the diversion of sugar stocks for ethanol production have contributed to the global price hike.
In response to concerns about the need for sugar imports, the Pakistan Sugar Mills Association (PSMA) Chairman Zaka Ashraf pointed out the delayed authorization for sugar exports by the government. He argued that withholding 1 million tonnes of sugar exports had cost the country potential foreign exchange earnings of $1 billion.
Ashraf emphasized the importance of competitive domestic sugar rates compared to neighboring countries to stimulate local sugarcane cultivation and production. Without such competitiveness, both local demand and export potential would continue to be compromised.