September 20, 2006	Wednesday	Sha'aban 26, 1427

KARACHI, Sept 19: The country expects to produce around 3.3 million tons white refined sugar this season starting from October 1, 2006. However, this is going to create a glut in the market because already around 1.6 million tons of unsold sugar stocks are lying in the country.

Contrary to the previous year when prices went sky high, the current season will witness a crash in sugar prices that may even inflict sever damage to growers’ interest and that of the sugar industry, observe sugar analysts.Due to poor harvest of cane crop last year, the country could hardly produce around 2.6 million tons, which was much below the domestic demand. Consequently, the government allowed free import of sugar by the private sector and the Trading Corporation of Pakistan.

At present around 1.6 million tons of sugar stocks are lying with different stakeholders, which will allow the country to have opening stocks of around one million tons at the start of new crushing season. On an average the country consumes around 0.325 million tons per month. This would mean that 0.65 million tons would be consumed before the start of the next season.

Industry sources say presently the TCP was holding around 0.8 million tons of white refined sugar, 0.225 million tons with trade and 0.609 million tons with sugar mills.

The open market has already started witnessing a fall in sugar price which is being quoted at around Rs32 per kg. Sugar analysts feel that once the new crop sugar starts pouring in, the price will further crash and this will imbalance the costing of growers and the industry.

Despite the fact that recent heavy rains in Sindh have damaged around five to 10 per cent of standing sugarcane crop, but it equally proved to be a boon for growers who are now expecting higher yield of cane. As a result of this, the province expects to produce around 1.1 million tons of sugar as against 0.9 million tons produced last year.

Similarly, Punjab is also going to harvest large sugarcane crop this season and sugar production is being estimated to be 25 per cent higher than last year.

Pakistan Sugar Mills Association (PSMA) Chairman Abdul Wajid told Dawn that the coming crushing season would be quite difficult for the growers and industry because in the presence of huge unsold stocks, offtake of sugar from the new crop would be slow and this would create liquidity problem for the industry.

As fallout of this situation, he said, the growers might also have to face some delayed payments from the industry. Mr Wajid also feared that this vicious circle might also directly inflict damage to the banking sector from where huge funds would be taken by the industry for running their industry and purchase of cane.

The PSMA chairman said the sugar industry had no financial strength to bear the brunt of carrying huge inventory for longer period because with a glut in sugar market there would be no immediate offtake of fresh production.

He urged upon the provincial and federal governments to seriously look into the situation and take immediate steps to help avert the ugly situation that might arise with the advent of new crushing season and save the growers and industry from facing financial crisis.

Responding to a question, Mr Wajid said in his opinion the only way out, and that too could be one of many required measures, was to delay the crushing season at least by one month. This will help achieve two objectives. Firstly, it would help the crop get fully matured to have higher yield, and secondly it would further exhaust sugar stocks and create a demand, he added.