|Shahid Sattar and Eman Ahmed
The role played by sugar in eroding society, environment, health, and consequently, disposable income of consumers all over the world has been extremely negative. In the case of Pakistan, these detrimental effects have extended to agriculture, industry, and the economy.
The perpetuation of the sugar industry and its interests has led to the replacement of cotton as Pakistan’s dominant crop costing industry and cost Pakistan an additional 10 billion dollars in the last 5 years, in addition to higher health costs and death rates.
It is essential for the government of Pakistan to educate the population regarding the ills of sugar consumption to not only protect their health but also the socio-economic future of the country.
Reasons for decline in Pakistan’s cotton industry
Cotton has always been considered a lifeline for Pakistan’s economy due to its resilience and reliability. However, the decline in its acreage and productivity over several years has negatively impacted the performance of the entire textile sector.
Pakistan has been the fifth-largest cotton producer in the world, accounting for a 6 percent market share in overall production, but over the last 10 years, cotton production has shrunk by 50 percent from 14.81 million bales to under 7.5 million bales. As a result, Pakistan’s textile sector, and thereby economy, have suffered considerable losses.
A major reason behind the decline of cotton is that sugarcane has cropped up in the most suited cotton sowing area. The country’s “sugar mafia” effectively keeps out cheaper sugar imports and forces us to produce our own sugar, an expensive and environmentally harmful crop for Pakistan.
From FY10 to FY18, the area of sugarcane crops increased by 42 percent. This encroachment is primarily due to the protection provided by the government for sugar as well as illegal extensions incapacity of mills already existing in the areas.
Moreover, the sugarcane crop is subsidized through protective prices as a 40% customs duty on the import of sugar has been imposed. This crop has assumed the status of a “political good” in the last decade, regardless of its economic comparative disadvantage.
For a sustainable economic future, the low-hanging fruit for Pakistan is cotton production at higher levels. The per acre yield of the cotton crop is shrinking due to the low profitability of the product compared to sugarcane. With cotton cultivation, the same area would add an additional 0.25 percent to Pakistan’s GDP along with a minimum of 1.27 percent of additional wheat contribution to GDP, if only half of the sugarcane production area is reverted.
This in short means that 1.523 percent (0.25%+1.273%) to GDP per annum can be added just by reversing the area lost to sugarcane over the last 5 years.
Sugarcane is a water-guzzling crop and is grown under irrigated conditions when water is available either through a surface canal or underground water. This crop consumes higher water than total household water demand in Pakistan, a country that is already very water-stressed.
The estimated water use ratio (3.4.) reveals that relieving one acre from sugarcane can provide water to about 3.5 acres of the cotton crop (PIDE). Furthermore, when it comes to the environment, sugar causes a lot of soil erosion and phosphate runoff.
Let’s take a look at sugar from an evolutionary standpoint. No foodstuffs exist in nature that are both sweet and acutely poisonous, so the sweetness was the signal to our ancestors that an item is safe to consume as an energy source. Liking sweet is ingrained into our DNA; it is vestigial from a metabolic standpoint.
However, science also tells us that sugar is only an energy source. There is no biochemical reaction in the body that requires dietary sugar. Yet of the 600,000 items in the food supply, 74% have added sugar.
In Pakistan, the sugar “mafia” has endeavored to manipulate and artificially hike sugar prices, amidst a deceptive campaign of impending sugar-stock shortages, while creating an artificial demand-supply gap. Sugarcane does not pose any natural advantage in Pakistan’s agricultural economy; rather, it has been artificially boosted, and this is detrimental to the country’s GDP.
Allowing the sugar market to work without government intervention, by generating signals that make farmers respond to the market would be the first step in restoring the allocation of land and water. The government must remove the sugar support price and subsidy on export, as well as control or do away with high tariffs on the import of sugar. However, due to elite capture, the interests of the sugar mafia have been allowed to flourish unchecked.
Sugar mills are in surplus in Pakistan and billions are spent every year on subsidies to export additional sugar, while illegal expansion in the capacity of some sugar mills continues with officials turning a blind eye.
On the other hand, the textile sector which is providing over ten million jobs and earning almost 15.5 billion dollars of foreign exchange for the country has been allowed to deteriorate to profit the sugar sector, which is a liability. Moreover, the textile industry processes raw cotton into finished products by providing employment that is manifold higher than the sugar industry.
Price supports, export subsidies, and the tariff on imports have created an artificial environment for the sugar industry. The resources spent in distorting the market can be allocated to develop high-yielding varieties of cash crops such as cotton. This will certainly improve crop productivity, along with improving our external accounts. (PIDE)
Incentivizing cotton production is a policy measure that can reap the maximum benefits for Pakistan’s economy, but given that the sugar industry is politically the most powerful, the policy environment has remained skewed in favor of sugarcane cultivation.
To allow fair competition of cotton with other crops, the government needs to refrain from interfering in the free market mechanism by eliminating large subsidies, price support, and high tariffs on sugar imports. Markets distorted by bad policy lead to erroneous farmer decisions. The government must take the difficult decision to limit the role of the sugar industry as the country can no longer afford to perpetuate its interests at the expense of economic growth.
Mr. Shahid Sattar, now Executive Director & Secretary General of All Pakistan Textile Mills Association (APTMA), has previously served as Member Planning Commission of Pakistan and an advisor to the Ministry of Finance, Ministry of Petroleum, Ministry of Water & Power. Eman Ahmed is a Research Analyst at APTMA. The views expressed by the writers do not necessarily represent Global Village Space’s editorial policy