ISLAMABAD, Nov 6: The price of sugar will rise in the wake of a recent agreement between the government and sugar mill owners.

The price is currently hovering between Rs36 and 38 per kg in major cities despite the sugar cartel’s promise to keep it at Rs34 per kg.

The sugar price rose mainly because the government decided not to release its imported sugar stock in the open market as part of its agreement with the powerful millers’ lobby.

The government had accepted all the millers’ demands as a pre-condition from them to start cane crushing in the first week of November.

Figures compiled by the Federal Bureau of Statistics showed that the average maximum price of sugar was Rs38 per kg in Islamabad and Rawalpindi, Rs37 in Karachi and Rs36 per kg in Lahore and Quetta.

Sugarcane growers, like millers, apparently have become a strong lobby, able to get away with increasing prices of their produce — a move which is likely to push sugar prices up in the domestic market despite a decline in international market.

Sources told this correspondent on Monday that the provincial governments, under pressure from the growers’ lobby, fixed cane prices without taking the federal government on board because of which sugar prices might rise even higher after the start of the new season.

Millers and growers, market analysts say, are exerting maximum pressure by creating artificial shortages to extract maximum benefits by hiking sugar prices, which is against the interest of the government as it would erode people’s support ahead of the elections.

The sources said that while the provinces had the legal right to fix cane price but they routinely consulted the federal government before setting the price.

They said that following the increase in cane prices, the mill owners forced the government to impose 15 per cent regulatory duty to protect their product from imported cheap sugar and also restrict the release of the federal government’s sugar stock held by the Trading Corporation of Pakistan (TCP) to only Utility Stores Corporation outlets.

Last year when the price of sugar rose in the international market, the millers increased the price but this year when the price came down to $300 per ton, they barricaded themselves behind high tariff walls and refused to reduce the price at the cost of poor consumers. It only showed that the millers were not ready for competition and preferred to safeguard their interests at any cost.

The sources said that the TCP had informed the government before the deal was struck with the powerful sugar lobby that nobody was ready to buy sugar above Rs30.50 per kg since Sept 8. This meant that there was a glut in the market.

The millers had informed the government that the ex-factory sugar price would be Rs31 in Sindh, Rs30 in Punjab and Rs30.5 in the NWFP during the upcoming season. The price excluded 15 per cent GST and dealers’ and distributors’ commissions.

Under the agreement, the millers ensured that the sugar price would be maintained at Rs34 per kg which seemed unrealistic as some of the millers had started terming it unfeasible to maintain the price at the agreed level. The sources said that the government should consider revoking the agreement with mill owners if they failed to keep their word about keeping the price at Rs34 per kg.