ISLAMABAD, Nov 7: The government is expected to invoke sugarcane act of 1950 to use punitive action in case sugar mills fail to start crushing by November 15.

The law is being contemplated to be invoked at a time when a surplus of at least one million tons of sugar is expected to be available after the sugar produced in the wake of next crushing season reaches the mill stockpiles.

A senior government official told Dawn on Friday that a special meeting of the Economic Coordination Committee (ECC) of the cabinet had been convened on Saturday to discuss sugar situation in detail.

This would be the fourth meeting of the ECC in a row, discussing the sugar situation. On Saturday the ECC would consider only one more item — a Rs70-million claim of Passco against the Utility Stores Corporation (USC) for the payment of incidental charges on account of wheat supplied to the Utility about four years ago.

To be presided over by Finance Minister Shaukat Aziz, the meeting would formally approve a decision of the prime minister early this week asking the Trading Corporation of Pakistan to procure 200,000 tons of sugar for buffer stock.

Sources said the ECC would ask the provinces, particularly Sindh to invoke sugarcane act of 1950 to ensure that cane crushing was started not later than November 15. The provincial cane commissioner would also be directed to implement decisions of the prime minister and the ECC to ensure timely payments to the growers.

Under the sugarcane act, the government could arrest and fine sugar mills for not starting the crushing season.

The previous ECC meeting had decided to purchase 200,000 tons of sugar from the mills in two instalments — first in November and second in January. However, it could not decide whether Passco or the TCP should be assigned the task due to difference among the federal ministries.

A meeting presided over by the prime minister on November 3, however, decided that the TCP would procure sugar for buffer stock and consider it for export after the start of crushing season.

Meanwhile, the Pakistan Sugar Mills Association (PSMA) has informed the government that sugar stocks stood at 475,000 tons as on November 1, 2003.

K. Ali Qazilbash, secretary general of the PSMA, told Dawn on Friday that these stocks had blocked an amount of Rs9 billion of the farmers, mills and banks and had caused cash flow problems for the industry. These sugar stocks, he said, were enough to meet the consumption requirement of more than two months.

The PSMA has told the government that cash flow problem in Sindh was very serious and mills would not be able to start crushing before the first week of December. Some of the mills in Punjab may be starting crushing by November 15, he said. He said unless these stocks were sold, the cash flow problem would not be resolved. He said the government had decided to purchase 200,000 tons of sugar over a period of three months and by that time 475,000 tons stocks would automatically be consumed.

The government, he said, had told the industry that it would pay for the 200,000 tons but the stocks would remain at the mills, and mills would be responsible to maintain its quality by replacing old stocks with the new production.

He said the government condition to purchase sugar from only those mills who ensured payments to the growers, was not reasonable because such mills were comfortable with the cash situation as well. On the contrary, the sugar mills mostly in Sindh were unable to make payments to growers because of cash problems. And it is these mills that should have been helped out.

He said the country had been ending up with about 600,000 tons of surplus sugar every year for the last few years because of delayed government actions. Next year, this surplus would cross one million tons and plunge the industry into deeper trouble because of expected crash in sugar prices.

He said next year would again witness a bumper sugarcane crop and total production would be around 3,800,000 tons. With the leftover of around 200,000 tons from the current year, total production stocks would touch 4,000,000 tons against a total annual consumption of 3,400,000 tons.

Since two months of the year have already passed, the surplus by the end of next year would be 1,000,000 tons. Already, the mill-gate price of sugar, he said, had dropped to Rs16 per kg that at the final stage of sales goes up at Rs20 per kg in the market with the addition of Rs3 per kg GST and other charges. He said last year the crushing season was started in mid-November in Punjab and first week of December in Sindh.

He said the sugarcane act had become obsolete and the government could not invoke it in the current circumstances.