Daily Times

The sugar price control crisis in Punjab has once again placed a heavy burden on consumers and industry stakeholders. As of March 2025, sugar prices in the open market have surged to Rs. 160 to Rs. 180 per kilogram, forcing many households to cut back on consumption. In response, the Punjab government has stepped in to offer sugar at a subsidized rate of Rs. 130 per kilogram through designated Ramadan bazaars, with a purchasing limit of 5 kilograms per National Identity Card per month. While this initiative provides temporary relief, it fails to address the underlying structural issues driving price volatility in the sugar sector. Without comprehensive policy reforms and effective market regulation, sugar prices will continue to fluctuate, affecting millions of consumers and businesses across the province.

Sugar price instability in Punjab has been a long-standing issue, driven by several factors, including production shortfalls, hoarding, smuggling, and speculative trading. The ex-mill price of sugar in July 2023 rose sharply from Rs. 11,000 to Rs. 13,600 per 100 kg bag within a month, leading to a retail price hike of Rs. 160 per kilogram. The current price surge follows a similar pattern, as the combination of supply chain disruptions, high input costs, and ineffective government intervention creates the perfect conditions for price manipulation. While the Lahore High Court’s landmark ruling in October 2023 affirmed the provincial government’s authority to regulate essential food prices, enforcement remains inconsistent, allowing market players to exploit regulatory gaps.

A major contributor to Punjab’s sugar crisis is the imbalance between supply and demand. Pakistan’s total sugar production has struggled to meet growing domestic consumption needs. In 2024, national sugar output was estimated at 5.5 million metric tons, while demand reached nearly 6 million metric tons. This shortfall of approximately 500,000 metric tons has put significant pressure on prices. Additionally, reduced sugarcane cultivation due to water shortages, rising production costs, and limited incentives for farmers has further constrained supply. The Punjab government has attempted to bridge this gap through strategic sugar imports, but delays in decision-making and pricing disagreements have hindered effective implementation.

Imports should be carefully managed to avoid excessive reliance on foreign sugar, which could negatively impact local farmers and millers.

Rising production costs have also exacerbated the crisis. The cost of sugar production has soared due to inflation, currency devaluation, and increased energy prices. In early 2025, electricity tariffs reached Rs. 42 per unit, significantly raising operational costs for sugar mills. High fuel prices have also affected transportation costs, which surged by 30%, making sugar distribution more expensive. Additionally, high interest rates-exceeding 22%-have made borrowing difficult for sugar mill owners, restricting liquidity and slowing down production. These economic pressures have led to a significant increase in the ex-mill price of sugar, which in turn has been passed on to consumers.

Hoarding and smuggling remain key factors driving artificial price hikes. Wholesalers and traders have long exploited market inefficiencies to create artificial shortages, stockpiling sugar and selling it at higher prices when demand peaks. Reports indicate that in late 2024, an estimated 200,000 metric tons of sugar were hoarded in Punjab alone, contributing to price spikes in the retail market. Smuggling across provincial and international borders has also intensified, as higher sugar prices in neighboring countries make it profitable for traders to sell sugar outside Punjab rather than in local markets. Weak enforcement mechanisms have allowed these practices to continue unchecked, despite government regulations aimed at curbing hoarding and illegal exports.

To tackle the crisis effectively, a comprehensive and multi-pronged approach is needed. The Punjab government must enhance market monitoring and regulatory enforcement to prevent price manipulation. Strict penalties should be imposed on those found guilty of hoarding, and regulatory agencies must be empowered to conduct regular inspections of warehouses and storage facilities. Advanced tracking systems should be introduced to monitor sugar stock movements, ensuring that traders and wholesalers do not engage in artificial supply restrictions.

Another crucial step is increasing domestic sugar production. The government should incentivize farmers to expand sugarcane cultivation by offering subsidies on fertilizers, pesticides, and high-yield crop varieties. Additionally, investing in modern irrigation systems and water conservation techniques can help improve sugarcane yields, reducing reliance on imports. In the long term, encouraging research and development in the sugarcane industry will be vital to enhancing productivity and ensuring stable supply.

Strategic sugar imports can also help stabilize prices in the short term. The government should establish an efficient procurement mechanism that allows sugar imports to be quickly arranged whenever a supply shortfall is anticipated. By securing bulk sugar imports at competitive rates, the government can ensure that domestic shortages do not lead to extreme price hikes. However, imports should be carefully managed to avoid excessive reliance on foreign sugar, which could negatively impact local farmers and millers.

Expanding subsidized sugar distribution programs beyond Ramadan bazaars is another essential measure. While the Rs. 130 per kilogram subsidy has provided some relief, making it accessible only through select bazaars limits its impact. The government should consider expanding the program to include all Utility Stores across Punjab, ensuring that a broader segment of the population benefits from the subsidized rates. Additionally, targeted subsidies should be introduced for low-income households to ensure that the most vulnerable consumers are not disproportionately affected by rising sugar prices.

Another long-term strategy is deregulating the sugar sector to encourage competition and efficiency. The government should review existing policies that create barriers to entry for new market players and explore ways to increase private sector participation in sugar production and distribution. Allowing a more competitive market structure could help reduce price manipulation and ensure fair pricing for consumers.

Regional cooperation is also key to addressing the sugar crisis. The Punjab government should collaborate with other provinces to create a unified sugar price stabilization framework, ensuring that policies do not contradict or undermine each other. At the national level, stronger coordination between federal and provincial governments is required to develop consistent and effective strategies for price control and market stabilization.

Public awareness campaigns can also play a role in stabilizing sugar demand. Educating consumers about the factors influencing sugar prices and encouraging the use of alternative sweeteners can help reduce excessive demand pressure. Promoting dietary diversification and supporting industries that produce alternative sugar sources, such as beet sugar, can help create a more resilient and sustainable sugar market.

Ultimately, the sugar price crisis in Punjab requires a coordinated and proactive response. Short-term relief measures such as subsidies and government intervention in pricing can provide temporary relief, but without addressing the underlying structural issues, price volatility will persist. Strengthening market regulation, enhancing domestic production, curbing hoarding and smuggling, and promoting regional cooperation are all critical steps towards ensuring long-term stability in the sugar sector. The Punjab government must act decisively to implement these measures, ensuring that consumers are protected from price shocks while also supporting farmers and industry stakeholders in creating a more efficient and sustainable sugar market.

The writer, a chartered accountant and certified business analyst, is serving as a CEO for Model Bazaars.