Smuggling and ‘Satta’: Everything That Went Wrong In Sugar Saga 2023

A potential deficit during the two and a half months until the sugarcane crushing season starts in late November has prompted the government to finally look to purchase 100,000 tons of sugar from Brazil.

It’s interesting to note that the volume exported in July 2023 was 5,542 tons, more than five times the amount exported in June 2023. Later, we’ll talk more specifically about this.

Furthermore, when the government approved exports the previous year, we were informed that we had a surplus of 1.2 to 1.7 million tons of sugar. What happened? We need to make a quick diversion in order to accomplish that!

The Pakistan Sugar Mills Association vehemently argued that Pakistan could make more than $1 billion at the time because the prices were high, but the federal government nonetheless enacted a complete export embargo in May 2022. The government authorized the export of 100,000 tons of sugar in November, then in January 2023, the amount was increased to 250,000 tons, despite the country’s falling foreign reserves.

Despite opposition from the federal minister in charge of national food security and research at the time, exports were nonetheless permitted.

Minister Tariq Basheer Cheema remarked in November 2022, “The government cannot permit sugar export while simultaneously increasing import prices.”

The Lahore High Court issued a stay order after the Sugar Advisory Board, a government organization, raised the sugar price in April to Rs. 98 per kg. The provincial government’s attempts to adjust the prices were met with a similar response.

Despite the apparent establishment of a track and trace system, sugar smuggling via the Afghan border was widespread. Nearly 800,000 tons of sugar have been trafficked through the western border, according to the Punjab Food Department. The fact that the Punjab Food Department is disclosing the data in the manner of a news outlet rather than taking harsh action calls for a discussion all by itself.

Retail prices have increased by almost 70–80 percent since April to Rs. 170–185 per kg, and they may soon surpass Rs. 200 per kg as a result of worsening market mood. Ex-mill prices have already risen by 37% in less than two months to reach Rs. 16,500 per 100kg (today’s average price), and they will surpass Rs. 18,000 in the future weeks.

What Did Go Wrong?

First and foremost, it has been claimed that data on supplies given to the government was fabricated by the former minister of National Food Security and Research. But let’s not go there and pretend that when we had the surplus, we allowed a third of it to be smuggled and continued exporting it—in fact, we even increased the amount by five times in July 2023—before realizing that we needed to outlaw it. Sound good to you?

In private meetings, officials from the Food and Agriculture Department frequently argue. They place the blame on the Federal Board of Revenue while conceding that it is nearly impossible to cover the vast Afghan border, but I suppose the aim of inspecting the smuggling would be a bit before it reaches the border

Trading, however, is another element that is rarely brought up in these discussions. Given its volatility and high stakes, sugar is one of the most traded commodities in undocumented trade, which does not exist in Pakistan, at least not on a large scale. The 2020 Sugar Inquiry Committee Report contains extensive documentation of the facts that advance contracts and satta in the sugar business lead to unwarranted speculation and price increases in the market.

During the crushing season, sugar mills must pay for the purchase of sugarcane, thus they oversell their stockpiles to raise money. These shares continue to sit in the sugar mills and are traded more than a dozen times. Without ever having to see the product, one simply needs to call someone, transfer the funds, and instruct them to sell at a later time, according to a market expert who spoke with ProPakistani.

What if we told you that by trading and hoarding sugar, there are people who have gained millions of dollars in profits in only 15 to 20 days? he asked.

He claimed that in the end, it raises prices to the point where the market perceives a shortage before it actually occurs. The government must ensure that the sold sugar inventories are lifted within three days of the sale, but this rarely occurs.

Some sugar mills, including Ittehad and JDW, have imposed a Rs. 20 per bag per day fine if the stocks are not lifted which will be put into effect on Saturday after the Food Department recently asked all the sugar mills in Punjab for information on the stocks that have been sold to dealers or brokers but have not yet been lifted.
However, the move is too late from both the government and sugar mills as the amount hoarded privately is enormous.

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