Tax on windfall profits of sugar millers being mulled
The National Assembly Standing Committee on Commerce during a recent meeting chaired by Jawed Hanif Khan, criticized the sugar industry as a 'mafia' and decided to identify the 'hidden' beneficiaries.
The committee subsequently constituted a special multi-party panel to investigate the causes behind the sugar price spike, the circumstances surrounding sugar exports and imports, and the cyclical patterns of the industry over the years. The panel includes Atif Khan (Convener), Mirza Ikhtiar Baig, Shahida Rehmani, Tahira Aurangzeb, with Farhan Chishti as a special invitee.
Pakistan tenders to buy 100,000 metric tons of sugar, traders say
Retail sugar prices are currently hovering around Rs 200/kg. Minister for National Food Security and Research, Rana Tanveer Hussain, stated that some mills are not adhering to the agreement with the government regarding the ex-mill price.
According to the agreement—available with Business Recorder—the maximum ex-mill price was fixed at Rs 165/kg effective July 15, 2025, with a permissible monthly increase of Rs 2/kg until October 1, 2025. This sets the ex-mill prices at: (i) July 15 – Rs 165/kg ;( ii) August 15 – Rs 167/kg ;( iii) September 15 – Rs 169/kg; and (iv) October 15 – Rs 171/kg
The agreement also stipulates that provincial governments will enforce retail prices as per law and policy.
Insiders from the Ministry of National Food Security and Research argue that the Rs 2/kg monthly carry cost—originally based on a 25% interest rate—which is no longer justified now that the rate has dropped to 11%. They claim the actual carrying cost is closer to Rs 1/kg and that even this estimate has been exaggerated by the Pakistan Sugar Mills Association (PSMA).
The agreement further outlines that corporate consumers must procure sugar directly from mills, with pricing to be mutually agreed.
The federal government will only permit the export of sugar stocks exceeding 7 million metric tons (MMT)—including carryover and 2025-26 production—30 days after the end of the 2025-26 crushing season.
Final decisions regarding available stock will be made by a four-member committee comprising representatives from the federal and provincial governments, as well as two PSMA members, using FBR's Track & Trace System (TTS) data as the baseline.
Sources indicate that both the Finance and Commerce Ministries were hesitant to support sugar exports, fearing domestic price escalation. They allege that major sugar groups that held stocks through the end of last year made substantial profits from exports.
The PSMA had previously assured the government that sugar prices would not exceed Rs 140/kg. However, instead of offering to create a buffer stock for price stability, millers were reportedly lured by the export opportunity—given the expectation that local prices would rise, international prices being Rs 30-40/kg higher; and no sales tax liability on exports.
As prices now soar past all reasonable limits, the government is considering sugar imports—triggering a national controversy and renewed criticism of PSMA's influence and manipulation.
Minister Rana Tanveer Hussain, who had earlier opposed sugar export, aligned with the stance of a committee led by Musaddiq Malik, is reportedly facing criticism within Cabinet meetings. In a recent Sugar Advisory Board (SAB) session, he is said to have reprimanded the PSMA, expressing frustration over the steep price hike.
To address growing public pressure, the newly formed NA panel led by Atif Khan is considering a windfall tax on sugar mill profits, similar to the one imposed on banks. The proposal aims to curb the alleged manipulations of the PSMA, which has historically lobbied for favourable export policies while allegedly providing misleading data.
During the previous government as well, the sugar industry came under scrutiny for benefiting from export-induced price hikes. Larger groups, with greater holding capacity, were again the primary beneficiaries.
'Taxing windfall profits will support the national exchequer and send a strong message to the industry not to exploit the public,' said an official from the Ministry of National Food Security.
Meanwhile, the government's efforts to stabilise prices have yielded little success. A previous tender floated by the Trading Corporation of Pakistan (TCP) for the import of 50,000 tons of sugar failed to attract bids. TCP has now floated a fresh tender for 100,000 tons. Officials from the Commerce Ministry say they are proceeding cautiously, given the sensitivity of the issue.
Copyright Business Recorder, 2025
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