India and Pakistan are witnessing a stark contrast in sugar prices these days. While the retail price of sugar in India has reached Rs 60 per kg, Pakistan, which is going through a financial crisis, is selling its sugar at a cheaper price despite incurring huge losses. This difference is due to the different constraints and policies of the two countries. Let us know why sugar is being sold cheaper in Pakistan than in India?
Why are prices increasing in India?
India is the world’s largest producer and consumer of sugar. However, there are several reasons behind the high cost of sugar here. The biggest reason is the government’s Ethanol Blending Program. A large portion of sugarcane juice and molasses are now being used directly in the production of ethanol to meet the target of blending ethanol in petrol. This has reduced the amount of sugar produced for the market.
Apart from this, irregular rains and drought in major sugarcane producing states like Maharashtra and Karnataka also affected the sugarcane harvest last season. Along with this, the government has also increased the minimum wage of sugarcane to give better prices to the farmers, which has increased the expenses of the mills. To maintain domestic supply during the festive season, the government has also imposed strict restrictions on sugar exports.
Why is sugar cheaper in Pakistan?
The situation in Pakistan is completely opposite. The cost of making sugar there is not less than in India, yet the government and the mill owners are selling it at a much cheaper price in the foreign market. The biggest reason for this is the severe shortage of foreign currency i.e. dollars in Pakistan. Pakistan’s foreign exchange reserves are constantly decreasing and the country needs dollars urgently to pay its import bills and avoid defaulting on its loans. Due to this, sugar is being exported even at a loss.
Differences in the thinking of the two countriesIndia is trying to increase the use of ethanol to reduce oil imports, get better prices for farmers and ensure that the supply of sugar in the country is always secure. Even though the price has been hovering between Rs 55 and Rs 62 per kg for some time, the supply in the domestic market has remained stable. On the other hand, Pakistan’s constraints are different. Due to its weak economy and urgent need for dollars, the government has to sell sugar in foreign markets at a loss, burdening its exchequer with subsidies.
