Sugar millers and Pakistan’s government are once again locked in a dispute — this time over a claimed surplus of over one million tonnes of sugar in the country. Millers are pushing for its export, arguing that this would boost their liquidity, clear warehouses, settle outstanding dues to farmers, and enable them to procure the next sugarcane crop, due in November.

The government, however, remains wary. Last year, exporting 750,000 tonnes triggered a sharp price hike. A few months later, it had to import 300,000 tonnes to stabilise the domestic market. Understandably, policymakers are reluctant to repeat this costly cycle of exports followed by panic imports.

Surprisingly, the Pakistan Kissan Ittehad has also entered the fray, demanding sugar exports. With a bumper crop expected, it warns that millers could use liquidity and warehousing constraints to delay crushing and depress sugarcane prices. Already, the sugarcane minimum support price regime is no longer in effect under the conditions agreed with the International Monetary Fund.

In reality, without a coherent policy or long-term strategy for the sugar sector, the government repeatedly ends up making hurried import or export decisions. Over time, this pattern has reinforced a widely held perception: among the sector’s three main stakeholders — millers, farmers, and consumers — millers have often emerged as the principal beneficiaries of government decisions.

The elite capture and institutional inertia have made the sector notoriously difficult to regulate

The core question is whether the government will keep managing the sugar sector on an ad hoc basis, resorting to temporary fixes only after public outcry, or finally address the concerns that various quarters have been raising for years — concerns that fall into three broad categories.

First, the area under water-intensive sugarcane continues to expand. Between FY16 and FY26, sugarcane production rose 37 per cent, outpacing population growth. In contrast, per capita sugar consumption fell by 4pc, from 1.28kg to 1.23kg (per month) between FY19 and FY25. These trends collectively indicate a potential surplus in the coming years — a red flag for the government, particularly if the cost of sugar production exceeds global sugar prices.

Meanwhile, dwindling water resources raise a more fundamental question: how sustainable is the continued expansion of sugarcane acreage? From the farmers’ perspective, this shift toward sugarcane — particularly at cotton’s expense — reflects a rational economic decision based on better returns, not a planning failure on their part.

Second, the sugar sector has faced persistent allegations of cartelisation for decades, with most mills owned by a handful of politically influential families. This political clout reportedly allows millers — working in tandem with brokers, stockists and other intermediaries — to push up market prices. Unsurprisingly, the government’s price-control system for this essential commodity has proven futile, while the Competition Commission of Pakistan has remained largely ineffective.

Compounding the problem, Punjab — which accounts for around 70pc of the country’s sugarcane production — has maintained a ban on the establishment of new sugar mills since December 2006. The ban has reduced competition, strengthened the market power of the 79 (operational) mills and potentially facilitated price-fixing. The elite capture and institutional inertia have made the sugar sector notoriously difficult to regulate.

Third, the government has repeatedly provided subsidies to the sugar sector to export surplus sugar, citing the price differential between local and international markets. This year, the situation is fortunately in Pakistan’s favour. Yet the deeper question remains: does the government have a long-term policy to align the sugar sector with international markets without providing subsidies to millers, while ensuring a fair return to farmers?

To address these concerns and curb market volatility, the government must abandon its reliance on ad hoc interventions and reactive regulatory steps. What the sector needs is a long-term policy that protects the interests of both growers and consumers, built around the following priorities.

Water is a pressing concern behind sugarcane’s expansion. Many advocate restricting sugarcane cultivation through crop zoning or acreage caps. However, without a dedicated crop diversification fund to support farmers, policy must focus on improving water-use efficiency rather than further restricting their crop choices.

The sugar industry should channel its corporate social responsibility funds towards promoting drip irrigation, trench planting, wider row spacing, and other water-saving practices, while also supporting groundwater recharge through rainwater harvesting.

Before the Supreme Court in 2016, the Punjab government defended its ban on new sugar mills, arguing that new capacity would drive further expansion of water-intensive sugarcane, particularly in cotton-growing areas.

Sugar beet offers a compelling alternative — maturing in just six months and requiring far less water than sugarcane’s 12-15-month cycle. Worldwide, beet accounts for 20–22pc of total sugar production, and a few Pakistani mills also process it. Pakistan produced 92,786 tonnes of beet sugar in FY25. Moving forward, the government should permit the setting up of new mills that predominantly process beet. This would encourage a more sustainable and water-efficient sugar industry.

With rising surpluses of sugarcane, maize, and coarse rice, Pakistan must seriously evaluate the viability of ethanol production for fuel blending. Several countries including India have already taken this path. Expanding ethanol output through multi-feedstock — sugarcane juice, maize, rice and other grains — plants would offer farmers a strategic alternative market while reducing oil imports, lowering carbon emissions, and strengthening national energy security.

Pakistan must align its agriculture sector — particularly sugar — more closely with global markets. This requires trade deregulation and unrestricted import-export flows. These, however, should be governed by a dynamic formula-based tariff that adjusts to global price swings, balancing the interests of consumers and millers. To protect farmers and prevent disputes with millers, sugarcane procurement prices should be indexed to the average prices of sugar and its by-products over the preceding two years.

However, deregulation cannot succeed unless the federal and provincial governments establish a strategic reserve of around half a million tonnes of sugar. This cushion would help absorb price spikes caused by import delays or market manipulation by millers.

In sum, Pakistan’s recurring sugar crisis is fundamentally not a supply-and-demand failure, but the result of policy vacuums, institutional weakness, lax enforcement, and poor regulatory oversight. Until the government replaces quick fixes with lasting reforms, consumers and farmers will continue to pay the price.

Khalid Wattoo is a development professional and a farmer. Dr Waqar Ahmad is a former Associate Professor at the University of Agriculture, Faisalabad.

Published in Dawn, The Business and Finance Weekly, September 28th, 2026