LAHORE: Sugar mills and the government are at loggerheads after Finance Minister Ishaq Dar called for a probe into the recent price hike in the retail market.

Mr Dar directed the federal secretaries concerned to take up the matter with provincial governments im­­mediately.

He said stable sugar prices must be ensured for the benefit of general consumers in line with standing instructions from the Economic Co­­ordination Committee of the cabinet.

Reacting to Mr Dar’s statement on Wednesday, the Pakistan Sugar Mills Association (PSMA) blamed the government for creating a “glut-like situation” in the domestic market by not allowing exports at the right time.

“The entire stock of the sugar industry is pledged with banks. Due to a glut-like situation, it is impossible to de-pledge the stocks and deliver to customers at the current level of prices,” a spokesman for the PSMA said in a statement on Wednesday.

“The finance minister should also ask for the cost of production of sugar mills before making any negative statement,” he added.

Sugar prices touched the lowest ebb because of oversupply and a lack of permission for the export of sugar, the spokesman said.

“Resultantly, the price declined to Rs45-46 per kilogram, which can never be considered a benchmark.”

The price of sugarcane is fixed by provincial governments while the sugar price is determined by market forces.

In line with Mr Dar’s instructions, the industries secretary sent letters on Tuesday to the chief secretaries of Sindh, Punjab and Khyber Pakhtun­khwa to express concerns of the federal government about rising sugar prices.

According to the PSMA, the federal government had fixed the assessable price of sugar at Rs60 per kg, which means the selling price should be Rs66 to recover sales tax.

“The federal government failed to support sugar exports while the country was in dire need of foreign exchange.

“Although a surplus quantity was available, the government allowed exports of only 425,000 tonnes,” the spokesman said.

He said the industry could have easily disposed of the surplus quantity without seeking any rebate. Although the Sugar Advisory Board recommended that the export of 1.2 million tonnes of sugar be allowed, the ECC permitted foreign sales of only 300,000 tonnes without any rebate, he said.

Now that the international market price is $380 per tonne, it is important to dispose of surplus sugar with a rebate from the government keeping in view the fixed sugarcane price, he added.

Published in Dawn, August 10th, 2017