HYDERABAD: While sugar cane crushing season has entered its peak stage, retail prices of sugar have also jacked up, indicating more increase in the retail cost of sugar in the days to come to make matters worse for consumers who are currently bearing the brunt of higher flour prices.

The wholesale price of sugar was Rs6,000 per 100kg bag (or Rs60 per kg) in Nov 2019, according to a market a dealer on Tuesday. On Jan 18, it was Rs66.50 per kg as wholesale rate and with retailer’s profit margin Rs70/kg. On Jan 21, the wholesale price of Rs72 per kg in Hyderabad’s market took sugar’s retail cost to Rs76 per kg and some were selling it at Rs80 as well without any check.

Around 45pc-50pc sugar cane crop of 2019-20 season was said to have been harvested and crushed by sugar mills across Sindh to get close to a million tonnes of sugar. Remaining chunk of crop would be reaching 34 mills — currently busy in sugar cane crushing — and initial estimate shows that close to 1.8m tonnes of sugar might be produced this season against 1.719m tonnes production of 2018-19 season.

Pakistan Sugar Mills Association (PSMA) Sindh chairman Dr Tara Chand attributes current hike in prices of sugar to expensive cane being bought by millers at the rate of Rs220/40kg on an average in this season. In northern Sindh region, it was procured for Rs210/40kg, he said. He said this season’s average sugar cane cost would be closed at Rs230/40kg to Rs240/40kg when compared with last year’s average procurement rate of Rs190/40kg to Rs200/40kg.

He calculates today’s ex-factory rate of sugar production at Rs71.50 per kilogram inclusive of Rs10.20 sales tax (increased from Rs5 to Rs10.20 in 2019-20 budget). With addition of brokers’ commission, wholesaler as well as retailer’s margin, freight and other expenses, price of sugar comes to around Rs80 per 1kg or a little above that in retail market. “We are getting four kilograms of sugar with 10pc sucrose ratio from a maund of sugar cane procured at the rate of Rs240,” he says. He added that the cost of doing business was constantly increasing on their part.

So far, according to him, around 50pc of total sugar cane crop had been procured and crushed to produce close to 900,000 tonnes sugar. Basing on his estimates, the remainder of 50pc crop would also produce 900,000 tonnes to make 1.8m tonnes of total sugar production this year.

His claim is that this year’s sucrose recovery ratio has dropped by half point and accordingly assessed at 9.8pc on an average. “Last year 10.75pc sucrose recovery was achieved in the corresponding period [Jan 2019] which is 10.25pc now,” he says. Last year’s carryover stocks of sugar stood at 178,000 tonnes on Nov 30, 2019, he disclosed.

He complained of inadequate supplies of sugar cane crop from growers. “We have told the government that if any mill wants to close their operations because of short supplies, no action should be taken against them. Mills tell us in the PSMA that they are not getting the required cane supplies”, he claimed.

Sindh’s sugar mills had started sugar cane crushing in Nov 2019 and around 12 of them from lower Sindh region or downstream Khairpur district had closed their operations on the ground that they had not been getting sugar cane from growers.

Later at a meeting — chaired by the Sindh cane commissioner — with growers, it was decided that they would be restarting crushing. They had to resume operations primarily because their counterparts in northern Sindh had declined to close their operations and had started lifting sugar cane from lower Sindh areas in anticipation of raise in the price of sweetener this year.

Growers sceptical

Sindh Abadgar Board (SAB) vice president Mehmood Nawaz Shah dismissed Tara’s claim while attributing raise in sugar’s retail price to expensive procurement of sugar cane crop by sugar millers. He said that maximum price that had been quoted by growers was Rs265/40kg, otherwise average rate varied between Rs195 to Rs197 in northern Sindh region, even up to Khairpur.

“I just fail to understand why did sugar’s price increase last year when sugar millers were not ready to even pay Rs182/40kg, which was notified in 2018-19. Likewise, sugar in Oct 2018 was sold for Rs55/kg to Rs60/kg inclusive of Rs47 ex-factory cost of sugar as per millers’ claim”, he said.

Now, he said, market reports suggest that cost of sugar had again increased to almost Rs80 per kg in retail market. He said sugar cane price of Rs182 had remained unchanged for around six years in a row, still sugar price increased to Rs63 ex-factory last year. He said the government had increased sugar cane’s price from Rs182/40kg to Rs192/40kg this season.

Market dealers were surprised over constant increase of sugar in retail market while current crop was still at the harvesting stage and even carryover stocks might not have been fully exhausted. “The Sindh government needs to seriously look into it before market starts witnessing a wheat-like fiasco in the sugar sector that will primarily affect consumers,” said a market trader. He said the government should verify stocks and market situation before sugar’s price shot up to an all-time high.

Published in Dawn, January 22nd, 2020