LAHORE, Aug 23: Mills fear drop in sugar production during the next season (Nov 2004-April 2005) due to shortage of crop reported from different parts of the country.

"The Punjab government crop survey alone has hinted at 16 per cent sugarcane shortage in the province from the last year yield," the Pakistan Sugar Mills Association (PSMA-Punjab) officials told this reporter on Monday.

They said the shortage in Sindh was being forecast between 20 to 25 per cent. In the light of these surveys, the PSMA says the sugar production may be around 3.4 million tons from last season's four million tons.

"The figures about the crop shortage in the Punjab have been worked out by the government itself," Punjab PSMA chairman Javed Kayany insisted when his comments were sought.

He also quoted a US Department of Agriculture report for 2004-05 which has forecast reduction of about 0.6 million tons in the sugar production in Pakistan next year. "This means that we'll be producing 0.1-0.2 million tons less sugar next year than our domestic needs," he claimed. The average sugar consumption in Pakistan is assessed to be 0.3 million tons a month.

The USDA report has also predicted a shortage of eight million tons of sugar in India that is likely to put pressure on the world sugar prices. "The sugar prices in the international market would go up to $400 a ton from the current $256 per ton," say the sugar industry sources. Thus, they say, the imported sweetener would be costing around Rs23.50/kg (if calculated at exchange rate of Rs59 a dollar) exclusive of import costs.

However, the millers assert, Pakistan would not need to import sugar to meet its domestic requirements despite the expected drop in the production in 2004-05. "We have sufficient buffer stock of close to 0.47 million tons of sugar acquired by the Trading Corporation of Pakistan (TCP) on the instructions of the government earlier this year to stabilize its rate in the domestic market.

If the TCP maintains those stocks till next year, it would not only rule out the need to import the sweetener to meet the local requirements but also help government stabilize the price of the commodity in the periods of shortage," Mr Kayany said.

But there have been reports in a section of the press that say that the TCP may sell a part of its stocks in the local market to check the recent increase in the retail sugar prices.

The ex-mill price of sugar is said to have jumped up to Rs18.80/kg due to the procurement by the TCP. The TCP had bought the "surplus stocks of the sweetener" from the mills in order to help them stabilize the rates in the domestic market.

The millers insist that the TCP should intervene in the market next year when the prices of the sweetener are expected to "go up sharply due to decline in the production."

"It is not in the best interest of the consumers or the producers to bring the TCP stocks in the market at this moment. The increase in the rates is very nominal. Next year we are going to watch a sharp rise in the sugar prices as a result of the reduced production. So that would be the best time for the TCP to intervene to protect consumers," they say.

Before instructing the TCP to procure sugar, the government is said to have sought a "commitment" from the mills to commence the next crushing season from Nov 1, and to make complete payments to the growers.

"In Punjab 39 sugar mills have paid 99.23 per cent of Rs28.105 billion to the growers," Mr Kayany said, quoting a report of Cane Commissioner. However, he added, the "mills wanted the government to allow a two-week relaxation period in the commencement of next crushing season in view of Eidul Fitr, and 880,000 tons of unsold stocks still lying with them.