Sugar, Water and National Security: The Cartel Returns
Opinion
By Fazeel Asif.
In 2024/25, 67 sugar mills exported 746,000 tonnes. Retail prices then rose from 143 rupees a kilogram to nearly 200 rupees, and the government had to authorise imports to steady the market. The Auditor General told the Public Accounts Committee that mills earned an estimated 300 billion rupees in windfall gains. The committee's chairman said that money went to roughly 42 families.
The cycle is starting again. A cabinet committee has approved the export of 200,000 tonnes. The State Bank has cleared banks to process shipments against mill-wise quotas drawn up by the Pakistan Sugar Mills Association and endorsed by Punjab and Sindh. The industry is allocating its own export rights, with the state's signature. It is lobbying for a million tonnes more, including stocks held in strategic reserves.
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This year the industry claims a glut. Mills put the surplus at the start of the new season at 1.16 million tonnes; the food minister says 600,000. Even the stock figures are reconciled between the FBR and the mills themselves; there is no independent physical audit. Exports are decided on numbers shaped by the exporters. Last year mills agreed to cap ex-mill prices at 165 to 171 rupees in return for export permission. They broke that agreement.
The industry says prices sit below cost, yet the same mills keep operating. Losses would normally force exit and invite new entrants. But Punjab, which grows about 70 per cent of the cane, has banned new mills since 2006. The IMF's governance diagnostic called sugar "a case study" of elites and regulators capturing public benefits. It noted that many mills are owned by current or former legislators. An IMF deadline to liberalise the sector by June 2026 has slipped.
Growers have lost their support price, and they fear mills will delay crushing and squeeze cane prices. That fear is legitimate. But it calls for rules that protect farmers directly, not quotas that pay mills first.
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The fix is fewer discretionary powers and more enforceable rules. Exports should be triggered by independently audited surplus, not by the cabinet. Strategic reserves should be off limits. The PSMA's role in allocating quotas should end. Mill-wise stock data should be published in real time. Ownership should be disclosed, and office holders with mill interests should recuse themselves from sugar decisions. Delayed cane payments should carry criminal liability. Beet and ethanol mills should be allowed to enter.
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The deeper question is water. Cane output rose 37 per cent in a decade. Over the same period cotton area shrank by nearly a million hectares, and the edible oil bill is heading towards $6 billion. PIDE finds that cane uses about three and a half times more water than cotton. Water used for cotton earns roughly four times the return. In a water-scarce country that is a matter of national security.
Last year's 300 billion rupees came from policy design, not competition. Unless this export is conditioned on audited surplus, the next price spike is already scheduled.
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Fazeel Asif is a policy analyst and former Chairman of the Punjab Board of Investment and Trade. He can be contacted on: fazeel63@gmail.com.
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