Pakistan sugar wars: No end in sight as import tax enforced and investigations launched on mills

By Pearly Neo contact

- Last updated on GMT

Pakistan has enforced an import tax on sugar entering the country, adding another layer of complexity to the country’s ongoing war between sugar cane farmers and sugar mills. ©Getty Images
Pakistan has enforced an import tax on sugar entering the country, adding another layer of complexity to the country’s ongoing war between sugar cane farmers and sugar mills. ©Getty Images

Related tags: Pakistan, Sugar

Pakistan has enforced an import tax on sugar entering the country, adding another layer of complexity to the country’s ongoing war between sugar cane farmers and sugar mills.

The conflict, which has been ongoing for several years​ now, has mainly stemmed from sugar cane farmers claiming that sugar mills have deliberately forced them into selling their sugar canes for lower prices than they should be getting. This has led to skyrocketing sugar prices locally.

Sugar imports were hoped to bring prices back down, but the introduction of a 17% tax on all imported sugar is likely to raise these prices again. The government also withdrew previous plans to import some 300,000 tons of sugar, according to Pakistan Tribune.

All of this points towards backpedalling by the government in handling the situation - it has also removed the minimum pricing for imported sugar that was previously set at US$725 per metric ton, opening the door for further price hikes.

“[Amendments] shall be made in Notification No. S.R.O. 812(I)/2016 [whereupon the minimum pricing of imported sugar and corresponding entries] shall be omitted,”​ Pakistan Federal Board of Revenue Chief (ST&FE-Policy) Mohy ud Din Ismail said in a formal statement earlier this month.

Given all of these moves, it is likely that sugar prices in Pakistan are not only unlikely to come down but may skyrocket even further. This would be bad news for both consumers and all F&B manufacturers that use sugar, especially those in the beverage, confectionary, bakery, dairy and other processed food sectors.

Both PepsiCo and Coca-Cola had previously pledged to invest some US$1.4bn​ to growth in the country – but if the price of sugar, one of the major commodities for the products of both companies, continues to rise so rapidly, it is hard to imagine that long-term focus in the market would make much business sense.

Investigations launched

There is still hope for the situation though, as Pakistan Prime Minister Imran Khan has ordered for a formal investigation to be conducted to get to the bottom of the sugar issues, to be conducted by a three-member committee he put together

According to Khan’s office (PMO), this committee included a high-level Intelligence Bureau representative, the Punjab Anti-Corruption Establishment (ACE) Director General Gohar Nafees and Federal Investigation Agency (FIA) Director General Bashir Memon.

“[The role of this committee is to] identify and fix responsibility, if any, on any individual/officer/organisation, including any purported benefit to a private party, besides suggesting a way forward,”​ said the PMO.

One of the individuals under heavy investigation was sugar tycoon and one of current ruling party Pakistan Tehreek-e-Insaf (PTI) leaders Jahangir Khan Tareen.

The investigations have seen FIA teams inspecting two of Tareen’s sugar mills, with Nation​ reporting that: “[Two] of these teams led by assistant directors Sajid Ikram and Khalid Amin will investigate the JDW-I and JDW-II sugar mills owned by Jehangir Tareen. [The] district administration has made special arrangements for protection of these teams.”

Both of these mills are located in the Rahim Yar Khan District, which contains most of the country’s sugar mills and thus produces the most sugar in the country.

Tareen denied any culpability in any scandal related in a television interview on Dawn’s News Eye ​previously, going so far as to commiserate with Khan over the ‘pressure’​ the Prime Minister was going through and claimed that sugar millers ‘do not have the money to hoard sugar’​ – another pressing issue that is said to have raised prices locally.

"There are people that keep insisting that it [sugar price hike] is because of me and a couple of other party members,”​ said Tareen, dismissing all connections to the price hikes or to sugar hoarding.

"They should go to the farmers, ask them how much money they are getting, assess the situation. [Sugar] mill owners cannot afford to hoard sugar, they do not have the money to do it."

"This inquiry committee that the prime minister has set up is very welcome. It will be good, the committee can look at facts and decide what happened, once and for all.”

The investigation's latest report linked PTI leaders such as Tareen, Minister for Food Security Khusro Bakhtiar and even some of these leaders' relatives to the scandal. Tareen again denied all allegations, this time in a tweet with a smiley-face, even as netizens blasted him and called for him to take responsibility.

"The exporters of sugar gained benefit in two ways: first, they were able to gain subsidy and, secondly, they profited from the increasing sugar prices in the local market," ​stated the report, publicly available on the Directorate of Electronic Media & Publications (DEMP) website.

Khan has not made any announcement about how these findings will be handled or punishments will be dealt out as of yet.

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