ISLAMABAD, June 23: The export of 100,000 tons of sugar early this year by Trading Corporation of Pakistan (TCP) has caused Rs700 million to the national exchequer, official documents reveal.
A senior finance ministry official told Dawn that another Rs1.4 billion loss was avoided when the ministry of commerce intervened to suspend further sugar exports by the public sector.
However, this has resulted into a blockade of over Rs12 billion, which would delay the start of next crushing season, aggravate the position of farmers particularly in Sindh and defaults to banks and DFIs, says a summary to the ECC that would come up for consideration during its next meeting.
The federal cabinet in its meeting on January 18, 2003 directed the TCP to buy excess sugar for export purposes. Official statistics suggest, the total sugar production during 2001-02 was 3.24 million tons. The stock of sugar as on November 1, 2002 lying with the sugar mills was 417,000 tons.
This caused a great unrest among the farmers and the millers, as the new crushing was delayed over a period of one and half months, which also created law and order situation particularly in Sindh.
In the current season 2002-03, the sugar production from sugarcane is 3.66 million tons. The sugar production from beet stood at 25,000 tons, making the total production at 3.68 million tons, highest ever recorded in Pakistan.
The summary said that it is expected that the present high level of sugar production would continue. The net availability of sugar for the whole season from November 2002 to October 2003 would be 4.10 million tons.
The estimated consumption for 12 months at the rate of 277,000 tons per month would be 3.32 million tons, which would result in net surplus of about 680,000 tons. The summary said that “any further procurement of surplus sugar amounting to 200,000 tons would incur a net loss to the national exchequer amounting to around Rs1.4 billion, which does not seem to be viable.”
Moreover, 680,000 tons of surplus sugar would result in the blockade of over Rs12 billion. It said the delayed crushing not only hurts the farmers but also delays sowing of wheat and other crops with the consequential and other adverse effects.
Sugar industry has also come under pressure with sugar prices continuously declining in the domestic market. The average annual retail price of sugar during 2001 and 2002 was Rs25.08 and Rs21.73 per kg respectively whereas during the current year the price is Rs19.94 per kg. This reduction in sugar prices means comparatively less liquidity with the mills, resulting in delayed payments to the growers and possible default on bank loans. The sowing of sugarcane is estimated to be satisfactory and would help the economic growth through sugar production if timely and correct decisions are taken, pleaded the summary.
To resolve the issue of sustenance of sugar industry, the ministry of industries had proposed the establishment of Sugar Industry Stabilisation and Development Fund but was not approved by the cabinet.
The industries ministry is of the view that “basic issue with the sugar industry at present is the availability of surplus stocks of 680,000 tons which need to be taken out of the market system to stabilize the prices and to improve the liquidity position of the sugar industry”.
In consultation with the ministers for finance, industries and commerce, a proposal has been finalised for export of 300,000 tons of sugar through self-financing. This makes obligatory on the sugar industry to export 15 per cent of the stocks held on April 30, 2003 by each mill before August 31, 2003.
In case of non-compliance by any mill, an excise duty on the un-exported quantity of 15 per cent stocks of sugar at the rate of Rs7 per k.g would be imposed.
This proposal, if implemented, would reverse the downward trend of sugar prices without any financial burden on the government. This would also result in nominal increase in the price of sugar in the domestic market to ensure future sustenance of sugar industry as it would be in the interest of all the stakeholders, claimed the ministry of industries.
The sugar industry claims that this would cause a loss of Rs5 per kg to the mills but would help clear the huge stocks and still provide buffer stocks of 380,000 tons for more than a month.
