LAHORE, Oct 27: The government’s decision to procure 100,000 tons of sugar after Eid and as much in January is said to have led to a drop of up to 25 paisa a kilogramme in the ex-mill rates of the commodity instead of stabilizing the market.

The government announced last week that it would procure some 200,000 tons of sugar to create a buffer stock and release the pressure on its prices from mills, which would start crushing by Nov 15.

The government said it would lift 100,000 tons after Eid (in the last week of November) and the rest in January against a demand by the producers to do so by the end of this month or first week of the next month.

“Time is of essence,” insists Pakistan Sugar Mills Association (Punjab) chairman Javed Kayani. “We appreciate the decision. It is an admission on the part of the government that the (sugar) industry is in a crisis due to excess production and is in a need of supportive measures. However, it has left a negative impact on the rate instead of stabilizing the market because the government has made procurement conditional with start of crushing by middle of next month,” he said while talking to this reporter on Monday.

“Had the government announced procuring sugar by end of this month or in the first week of the next month, the market would have stabilized,” he maintained.

The producers say they will have surplus stocks of 460,000 tons sugar on Nov 1 and 160,000 tons on Dec 1 “even if they are able to sell 300,000 tons during Ramazan.” In view of their unsold stocks, the producers have warned that they will delay start of crushing till Dec 10.

The government has been trying to convince them to start crushing by mid November. The government’s decision to create a buffer stock is also part of efforts to make the producers commence crushing by the middle of next month.

Asked if the producers planned to start crushing by the middle of November and withdraw their threat to delay it till Dec 10, he said “it might not be possible for them to do so because of two factors.” First, he pointed out, the sugar prices remained under pressure. “In fact the rates have slid by up to 25 paisa a kilogram after the government’s conditional announcement.”

“Second we had informed the government in our meetings with the ministers of finance and commerce and other high-ups that the mills, especially those in Sindh, are facing liquidity crunch due to surplus stocks. And it would not be resolved unless the government lifted at least 200,000 tons sugar by first week of the next month,” Mr Kayani said. He said the government’s decision to delay the procurement wouldn’t help the industry. “Instead it has and is likely to put further pressure on the rates as has been witnessed in the last couple of days.” The only solution, he insisted, “lay in the immediate procurement by the government of the quantity as indicated by it.”