KARACHI, Nov 15: The finance ministry is proving to be ‘penny wise and pound foolish’ by inordinately delaying about Rs600 million payment to the Trading Corporation of Pakistan on account of loss in sugar procurement from the mills early this year.

“This delay in payment is increasing the financial cost of Rs1.8 billion loan of the banks,” a well-placed source confided, who said that eventually the banks are making money from this infighting between two government agencies.

Early this year when sugar millers started making noises on build-up of their unsold sugar inventory, the government had decided to offer them an export package for 100,000 tons of sugar at the cost of taxpayers’ money.

Initial estimate of the government was to pay sugar mills Rs18,000 for a ton on expectation that export price would be $225 a ton.

The TCP was extended Rs1.8 billion loan from the banks at 5.7 per cent rate of return for the first quarter of this year — January-March 2003. In the procurement, the mills managed to get a price of Rs19,230 for a ton, which was Rs1,230 higher than original estimate.

When the TCP went for export of this sugar, it could manage to get hardly $213 and even less price from the international market. On an average, the TCP got $207 for a ton.

The loss sustained in this transaction forced upon the government by the fabulously rich sugar millers increased to about Rs600 million as against Rs550 million estimated earlier on assumption that the TCP would pay Rs19,000 average price to the millers and get $225 export price on a ton.

Under the agreement, the finance ministry has to pick up the entire loss sustained by the TCP in sugar business and adjust it from the taxpayers’ money. But the finance ministry bureaucrats have so far not released this amount to the TCP because of escalation of Rs50 million in the loss.

“With every passing day, the financial cost of the loan is increasing and eventually the government will have to pick up this loss,” the official remarked.

Market analysts say the second procurement of 100,000 tons of sugar from the millers will prove to be costlier for the government and taxpayers as international price of sugar is down to $180 a ton. They estimate this loss at about Rs700 million.

The current sugar procurement programme has been designed as an export package. The sugar being procured from the millers will be stocked and eventually exported after few months when the mills start producing sugar from the fresh crop.

Overall, the taxpayers will have to pay more than Rs1 billion to hardly two dozen fabulously rich sugar millers. There is doubt if the growers will get entire arrears and the consumers will get sugar at reasonably affordable prices.