November 10, 2003	Monday	Ramazan 14, 1424

Please Visit our Sponsor (Ads open in separate window)

ISLAMABAD, Nov 9: The federal government has approved a Rs4 billion credit line for Trading Corporation of Pakistan (TCP) to procure 200,000 tons of sugar from the mills in two instalments.

Official sources told Dawn on Sunday that the federal government has directed the provinces to invoke the 1950 Sugarcane Act and appoint inspectors to ensure that crushing is started not later than Nov 15.

It was also decided that the federal government would compensate the TCP for Rs700 million loss it faced on account of 100,000 tons sugar export about three months ago.

These decisions were taken by the economic coordination committee (ECC) of the cabinet which met on Saturday and debated on the sugar crisis for more than three hours.

The TCP would purchase 100,000 tons immediately through tender and remaining 100,000 tons in January.

These sources quoted a federal minister as telling the ECC that he had information from inside the sugar industry that a cartel was in the making to hoodwink the ECC decisions by starting crushing for a couple of days by mid of November and then take advantage of Eid holidays to delay it for about a month. By that time, they would exhaust their existing stocks.

He said that taking advantage of the tender to be floated by the TCP, sugar mills would sell their stocks at the price of their own choice. This would be more feasible for them in view of government restriction to purchase from only those mills who cleared payments to the growers while those in need of liquidity would remain barred from bidding lower price as they would not be able to clear dues to the farmers.

The ECC was clearly divided over the issue, the sources said. Privatization minister Dr Abdul Hafeez Sheikh and telecommunication minister Awais Ahmad Khan Leghari favoured the growers and insisted the public money should not be used to provide liquidity to the sugar industry.

Finance minister Shaukat Aziz and commerce minister Humayun Akhtar Khan disagreed and said the industry should be extended a helping hand to start the crushing season. Industries Minister Liaqat Ali Jatoi was supportive to the industry because of his portfolio and to the growers because of his constituency back home, these sources said.

Dr Hafeez Sheikh, Awais Ahmad Leghari and Liaqat Ali Jatoi, warned that government would land itself in a political crisis as they thought a sugar scam was looming which they said would surface later in the year.

They were of the view that government should not provide subsidy to the sugar industry and some in-built mechanism should be introduced to ensure payments of arrears to the growers. They told the meeting that majority of the lawmakers belonged to the rural areas and they would agitate the sugar issue in parliament in case growers did not get benefit of the government decisions.

These sources said that grower’s dues in the Punjab amounted to a few hundred million rupees while it was Rs5-7 billion in Sindh. As such, the millers in Sindh would be unable to compete for the 200,000 tons of sugar to be purchased by the TCP.

Some of the ministers proposed that government should pay directly to the growers to clear their dues on behalf of the respective sugar mills instead of payments to the mills but Shaukat Aziz and Humayun Akhtar Khan did not agree, the sources said.

The TCP chairman, sources said, told the meeting that he would use the government guarantee to arrange Rs4 billion from the commercial banks to procure sugar.

He was asked to pay 70 per cent of the price to the mills in the first phase and purchase only export quality sugar. If they failed in starting crushing by Nov 15 and in clearing dues to the growers, the government would charge them 10 per cent interest and impose 25 per cent penalty.

The Central Board of Revenue would issue a separate SRO under which this quantity of sugar would not be liable to GST unless TCP sold it in the local market. This sugar would remain at the premises of the mills and the provincial governments would appoint inspectors to ensure its export quality.

In case, this is not of export quality, the respective mills would replace it with the fresh stocks of export quality sugar and only then the remaining 30 per cent payment would be made by the TCP. The TCP has also been asked to get this sugar insured from the insurance companies.

The TCP was also directed to accept bids for 3,000 tons as minimum quantity to be offered by bidders, accept lowest bids on the terms and conditions stipulated in the tender, and have effective coordination with the provincial governments to ensure that the crushing season starts not later than Nov 15.