A rift is emerging between the government and the sugar mills since the last couple of days. It is due to the sudden price hike of sugar in the domestic market. Finance Minister Ishaq Dar, has directed federal secretaries to inform all provincial governments to look into the matter and take charge of the situation.

Dar is right in believing that a stable price benefits the public and causes lesser agitation. These items of daily use should not be costing that much, and a sudden price hike is certainly not what the public wants. The prices must also be in line with the standard set by the Economic Coordination Committee of the cabinet. However, in this scenario, there are a number of things that must be considered before blaming either party.

The Pakistan Sugar Mills Association (PSMA) has been highlighting that the government is exploiting the power they have over price demarcations and export since the start of the year. Despite the probability of exporting more, the government did not allow export of over 425,000 tonnes. No valid argumentation has been provided by any spokesperson of the government. This has resulted in the suppliers bearing with a huge sum of losses, which they can only cover by a price hike. It can only be assumed that the government is keeping an export quota in place to prevent a shortage in the domestic market, but if that is the case, incentives to sugar producers must be offered in return.

The cost of sugar production is way higher than the price set by the government, ie Rs60 per kg. However, to recover sales tax, the price needs to be adjusted to Rs66 per kg. What the provincial governments can do is set the price of sugarcane, but the price of sugar is set by market forces.

The government needs to provide a reasonable agenda for not allowing the export the sugar, especially when exports of the country have been decreasing due to overvaluing of the Pakistani rupee.

Sugar mill owners have pledged to stop providing any more sugar to the markets. All previous contracts are being fulfilled, and they refuse to take any more contracts unless the government accommodates them. While it is necessary to look at the comfort of the public; it should not be happening at the cost of our industries. This should not even be an issue considering that the year began with the promise of the sugar industry revolutionising itself with modern technology and bringing in a lot of revenues.