Government Decides to Increase Sugar Prices

In response to rising sugar prices and fluctuating market dynamics, the federal government has officially approved a decision to reset sugar pricing. While domestic retail prices have soared to Rs 190–200 per kg, the revised official price is meant to adjust the sales tax threshold and curb hoarding, but also reflects deeper complexities involving exports, imports, and production shortfalls.

• Budget-driven taxation: The Federal Board of Revenue (FBR) issued a new Sales Tax SRO, raising the “minimum” ex-factory value from Rs 72.22 to around Rs 152–155/kg—a 75% hike—to expand the taxable base and boost revenue by ~Rs 90 billion annually

• Inflation timing: Coinciding with the fiscal year 2025–26 budget, the change aligned sugar’s tax base with revised CPI benchmarks, offsetting lower subsidy allowances.

• Global price pressure: Domestic sugar prices had climbed to Rs 195–200/kg in major metro areas like Karachi and Islamabad.

For Consumers

• Higher costs at the mill: Millers now operate on a higher tax base, risking increased factory-to-retail pricing, even without actual cost rises.

• Minimal immediate relief: With open-market prices already above Rs 190/kg, retail impact may be covered up, but the margin for reduction is limited.

• Zero subsidy relief: Unlike previous regimes, Bitcoin-style price ceilings via Utility Stores are unlikely to be affordability tools this time 

For the Government

• Revenue gain: Expected Rs 90 billion boost in tax collections—vital amid IMF commitments 

• Fiscal trade-offs: Tax hike risks passing cost to consumers and businesses; few safeguards exist to limit consumer impact.

For Industry (Mills & Traders)

• Cartel concerns: The Competition Commission of Pakistan (CCP) has previously flagged sugar mills for price-fixing within the Pakistan Sugar Mills Association (PSMA)

• Manufacturer pressure: Mills are already paying Rs 100–110, but now taxed on Rs 152/kg, could either squeeze their margins or push price rises.

• Massive outflow: Over 757,000 MT of sugar exported between July and February, up 2,200% YoY; generated USD 407 million 

• Domestic shortage backlash: Export-driven scarcity is cited by critics, and the CCP voiced concern over industry-led supply manipulation.

• Public-sector imports: Govt to import 500,000 MT refined sugar; additional 250,000 MT raw sugar under review 

• Import costs: Estimated at Rs 155/kg post-duties—still lower than the current market price but insufficient for major retail relief 

• Budget strain: Adds USD 275–280 million to the import bill, raises concerns about the subsidy implicit in making up the price difference

• Cartel behavior: PSMA was previously penalized by the CCP for price-fixing; although court stays remain, anti-competitive action is ongoing 

• CCP’s perspective: Warns that industry lobbying led to policy cycles of export, shortage, import, and price spike 

• Tax-policy clash: Finance Division opposed tax concessions on imports, which were still pushed through, bypassing the ECC 

• Limited consumer relief: Imported sugar is still expected to retail near existing levels, meaning little out-of-pocket benefit for consumers.

• Tax base reset: Ex-factory floor price now around Rs 152/kg; sales tax mandated on this basis.

• Import program: 500K MT refined sugar approved; 250K MT raw sugar pending—imports underway.

• Anti-hoarding crackdown: FIA, IB, FBR authorized to act against miscreants manipulating supplies.

• Market monitoring push: CCP and NPMC tapped to manage profiteering and track price margins.

The government’s recalibration of sugar pricing—via a Billion-rupee tax base increase, organized 500K-tonne imports, and anti-price-manipulation measures—reveals an urgent response to commodity market volatility. The challenge now is balancing tax goals and industrial interests with consumer protection, fiscal discipline, and structural market reform. Without coherent coordination, Pakistan risks repeating cycles of boom-bust in staple goods.