Sugar Crises in PAKISTAN THROUGH demand and supply effect

Sugar prices have risen from Rs. 26 / kg to Rs. 45 / kg in few weeks, although Pakistan is an agriculture based country. Is this a good sign for our economy?

Sugar prices have risen because of the demand-supply situation. The supply in the market is not enough to meet the current demand. Sugar is made from the sugar cane, but our production of sugar cane is declining because the land used for farming is now being used for other purposes. Besides, sugar cane is now grown on lesser and lesser area with each passing year in Sindh due to scarcity of irrigation water.

With less sugar cane and sugar production, the mill owners can hoard marginal quantities of sugar and cause crisis in the market to raise prices. Sugar shortage will be on the rise every year because of the reduced area of sugarcane crop and steady growth in population. The mills producing sugar are not doing their job efficiently. The investment done in this sector is not up to the mark. Thus, productivity have decreased.

The main reason for the current rise in sugar prices are created by the hoarders, wholesalers and the mill owners. These three parties have created a sort of monopoly in the country. They have started stocking sugar and thus decreased the supply, so to increase the current price of sugar because of large demand. They know the productivity of the country is decreasing and they can influence the supply situation to gain abnormal profits.

Up to 37 biscuit manufacturers have shut down their businesses and prices of bakery items and sweets have increased by 20 to 25 percent. The increase in sugar price had adversely affected the biscuit industry, as 155 out of the 250 units in the country had been forced to shut down. The closure of biscuit factories is leading to people losing jobs. The pharmaceutical industry had also been affected by the increase in sugar price. Hotel owners have upped the prices of tea from Rs5 to Rs8-10 varying from hotel to hotel and businessmen associated with the sweet business have also raised the prices of their products. Sweets which were earlier being sold at Rs120 to Rs130 per kg. are now being sold at Rs150 to Rs180. To meet the current demand, government have to import sugar from abroad, which would have a negative influence on the country's trade balance.