Qudsia Bano

Ethanol-related incentives and climate risk considerations have been included in the proposed reform framework for Pakistan’s sugar sector, as part of efforts to expand value-added activities while maintaining adequate domestic sugar availability, according to a policy document issued by the Institute of Cost and Management Accountants of Pakistan (ICMA).

The document notes that diversification into ethanol and other sugar by-products is being considered as part of longer-term sector reforms. ICMA emphasises that any expansion of such activities should be aligned with domestic sugar supply conditions to avoid pressure on availability or prices.

According to the study, ethanol production and related incentives should be permitted only after domestic sugar stocks exceed an established optimal level to avoid pressure on domestic sugar availability.

ICMA explains that linking ethanol incentives to independently verified stock levels would help manage supply risks. The report notes that this would allow surplus sugar to be absorbed through ethanol and by-product use, while ensuring domestic sugar availability is not affected.

The document further states that ethanol and by-product policies are intended to operate within the broader monitoring and oversight framework proposed for the sugar sector. According to ICMA, reliable data on production and stock levels is essential for determining when diversification activities can be expanded without adverse market effects.

In addition to diversification measures, the report highlights climate-related risks to sugarcane production as an important consideration in sector planning. The document notes that floods, droughts, and unpredictable rainfall patterns pose challenges to agricultural output and supply reliability.

ICMA states that climate-related disruptions can affect both the volume and quality of sugarcane supplied to mills, with implications for overall sugar production. The study emphasises that such risks need to be reflected in long-term planning as the sector transitions toward a more market-oriented framework.

The report also notes that climate risks have implications for stock management and trade decisions. According to ICMA, unexpected production shortfalls can place pressure on domestic supply if adequate monitoring systems and buffer stocks are not in place.

The document concludes that incorporating ethanol-related incentives and climate risk considerations forms part of the broader restructuring of the sugar sector. According to ICMA, aligning diversification activities with domestic supply conditions and recognising environmental risks would support a more resilient sugar sector over time.

Credit: INP-WealthPk