ISLAMABAD:

The federal cabinet has approved the import of 500,000 metric tons of sugar, waiving 53% in import taxes to offset the negative impact of its earlier decision to allow sugar exports despite objections from the finance ministry.

The cabinet waived all the duties and taxes on the import of sugar, which has also made the Ministry of Finance jittery, according to the Finance Ministry sources.

The decision to waive taxes by overruling the finance Ministry was first taken during a meeting chaired by Deputy Prime Minister Ishaq Dar, according to the ministry sources. The cabinet subsequently vetted the summary moved by the Ministry of National Food Security.

The cabinet took the decision without discussing the matter as a regular agenda item and instead approved it through the circulation of the summary. The rules allow the disposal of cases through circulation.

Due to food emergency, the federal cabinet has allowed the import of 500,000 metric tons of sugar to stabilize local prices with immediate effect, said Rana Tanveer Hussain, the Federal Minister for National Food Security and Research while talking to The Express Tribune.

Rana Tanveer said that the central bank will provide the cash line to the Trading Corporation of Pakistan for the import of sugar.

The development came on the heels of rising sugar price that according to Pakistan Bureau of Statistics were recorded at Rs196 per kilogram last week. The prices were at Rs138 per kg before the sugar export.

Without waving off taxes and duties, the landed price of sugar had been estimated at Rs245 per kilogram. After exempting these taxes, the landed price is estimated at Rs153 per kg, excluding freight prices.

During the last meeting of the Economic Coordination Committee of the Cabinet the Finance Secretary had refused to waive off taxes or give subsidies. This time the government did not bring the summary in the ECC and got it directly approved from the federal cabinet.

The government's decision to earlier allow the export of 765,000 metric tons of sugar is said to be the main reason for the price hike from Rs138 to Rs196 per kg. However, the food minister said that the situation emerged after one million tons of low production of sugar due to climate change, which impacted the crop yield this year.

"The cabinet considered a summary dated 4th July 2025, submitted by the National Food Security and Research Division, which was circulated, for import of white crystalline sugar to ensure food security and stabilize the sugar prices and approved the proposal" according to the cabinet decision.

The cabinet approved the import of sugar by waiving off all applicable taxes, which stand at 53%, excluding provincial excise duty. The federal cabinet exempted 18% sales tax, 3% additional sales tax, 6% income tax, 20% custom duty and 6% additional custom duty.

The Information Minister Attaullah Tarar did not respond to a question whether the cabinet approved the tax exemptions.

Finance Ministry alarmed

The sources said that the Finance Ministry has agitated the cabinet's decision and informed the Prime Minister's Office that it could impact Pakistan's international commitments.

Pakistan has also given international commitments that it would not procure agriculture commodities, according to the Finance Ministry officials. They have cautioned to the PM's Office that the implementation of the cabinet's decision may create problems to meet international commitments.

A cabinet minister on condition of anonymity said that the taxes have been waived off by invoking the food emergency, thus, the decision should not go against any international commitments.

The Finance Minister Muhammad Aurangzeb did not respond to questions whether the ministry took up the matter of tax waivers with Prime Minister's Office.

In a press statement, the Ministry of National Food Security said that all necessary arrangements for the sugar import initiative have been completed, and immediate implementation is already underway.

The ministry highlighted that the current government had earlier permitted sugar exports when there was ample domestic supply, demonstrating a balanced policy to manage market dynamics. Now, by approving sugar imports, the administration aims to keep prices steady and protect consumers from sudden hikes.

According to the Pakistan Bureau of Statistics, the country exported 765,734 metric tons of sugar between July and May of last fiscal year, earning Rs114 billion. This marks a 2,200% increase in sugar exports compared to the same period last year.

Exporting first and then deciding to import has sparked concerns over the government's contradictory policies and the disadvantageous position imposed on consumers. After exports, domestic sugar prices hit a record Rs190 per kilogram - Rs58 higher than the pre-export price.

In March, the government had fixed the retail price of sugar at Rs164 per kilogram - 13% higher than the cap set during the export approval period - allowing millers to enjoy windfall gains in both local and export markets.

The government had negotiated the ex-factory and retail prices of sugar with the Pakistan Sugar Mills Association (PSMA), which has previously been accused of cartel-like behaviour by the nation's antitrust watchdog - the Competition Commission of Pakistan. Despite the agreed rates, the government failed to ensure stable retail prices.