Earlier this week, the government took a few important decisions to streamline the sugar trade apart from reducing the amount of subsidy on the sweetener sold through the chain of utility stores. But those decisions largely went unnoticed because of the media’s focus on the decrease in the sugar subsidy. The ministerial committee’s decision on Tuesday to increase the price of subsidised sugar by Rs10 a kilo is going to impact a tiny portion of the population with access to utility stores. But its decision to encourage the private sector to import the sweetener after November and let the market forces determine how much sugar needs to be imported and when, will go a long way in overcoming shortages and stabilising prices.

The country is now faced with the threat of sugar shortages due to the authorities’ insistence on importing only through the state-run Trading Corporation of Pakistan. However, owing to political influence and a cash crunch, the TCP was prevented from importing enough quantities of the sweetener, the global prices of which had bottomed out in May. The government spends more money now on importing smaller quantities of the commodity to leverage the market and keep hoarders from rigging profits. The delayed arrival of imported sugar also means erosion of the government’s ability to maintain price stability in the short term in case the bigger stockists decide to hoard the sweetener before and during Ramazan. The prices are already spiralling upwards.

It is a difficult balance to achieve. While the decision to let the market do its job without official interference should be welcomed, the government must not shy away from its responsibility of being the sole ‘watchman’ of the consumers’ interests. Markets cannot be perfect, and private business decisions are dictated by profits. The TCP should keep sufficient buffer stocks to enable the government to intervene in the market to streamline supply and stabilise prices if and when it is needed. Consumers should not be left at the mercy of an imperfect market.
If you want to follow news on your mobile, click on http://dawn.com/mobile/ and download Pakistan's first mobile news application. Currently this application is for Nokia phones only