• SSRC recommends sugarcane pricing based on sucrose content
• Go-ahead given to sweetener’s import, export to be controlled
• Heavy penalties suggested for delayed sugarcane crushing, cartelisation
ISLAMABAD: A ministerial panel on Wednesday called for major reform in the sugar sector, suggesting a shift in sugarcane pricing on the basis of sucrose content without any government role, freedom to import sugar but controlled export in case of surplus and imposition of heavy penalties for delayed sugarcane crushing and cartelisation by mills.
The Sugar Sector Reform Committee (SSRC), led by Energy Minister Hammad Azhar, was constituted by the federal cabinet in June 2020 following massive price hike in November 2019 and subsequent investigations by the Federal Investigation Agency (FIA).
The crisis had shaken the Pakistan Tehreek-i-Insaf (PTI) government in the Centre and Punjab, which led to parting of ways between Prime Minister Imran Khan and his longtime friend, Jehangir Khan Tareen.
The reform committee suggested a series of amendments to several federal and provincial laws and fixed new roles for Pakistan Commodities Exchange Control (PMEX) and Suparco to streamline the entire supply chain.
It suggested increasing the fine to Rs5 million as well as one-year imprisonment to late crushing mills and imposing Rs75 million worth of penalty for cartelisation.
The SSRC conceded that the sugar advisory board based in the Ministry of Industries and Production had viewed that the price hike in November 2019 was not due to market forces and had asked provinces to invoke price control and profiteering act to counter unfair market practices. However, later the board felt that ‘there was real shortage of sugar”, exerting pressure on prices, and therefore banned export of sugar but advocated imports.
The committee recommended strong media campaigns against use of sugar by people because of its health hazards as it noted that 30pc of the total sugar produced was consumed by households while the remaining 70pc was utilised for commercial use.
It said the major reason for price volatility and speculation was the result of unregistered supply chain at undisclosed locations.
Therefore, it suggested that the commodity should be deposited at accredited warehouses regulated by a collateral management company (CMC) after customer due diligence through electronic warehouse receipts while its trading and settlement records be maintained by PMEX to provide a level-playing field to market participants for efficient price discovery.
The committee recommended abolition of legislation by provincial governments on zoning of crops and leaving the choice of what to grow to farmers and market forces.
On the issue of delayed crushing, the committee observed that the Sugar Factories Control Act 1950 provided for crushing between the period starting from Oct 1 to Nov 30 each year, which was considerably a long period and should be curtailed.
The committee stressed the need to provide enabling legal instruments to provinces for intervention in case of delayed crushing, and observed that legislation carried out by Sindh was ideal as no date was defined and the date for crushing was approved by the cabinet each year under the Sugar Factories Control Act 1950.
It also proposed amendments to Sugar Factories Control Act 1950 to do away with indicative price but called for giving two to three years’ time to farmers to make adjustments.
Pricing of sugarcane should be according to the sucrose content and the provincial government should provide the latest equipment and laboratories to cane commissioners for testing of sucrose content and implementation of new pricing mechanism, it suggested.
The committee also called for adequate pricing of water on volumetric basis to avert market failure and remove externalities, leading to incorporation of actual cost of production of sugarcane. Under the new legislation, the provinces would be required to supply water to cropping areas.
It said farmers and the private sector should have free choice of area to cultivate crops and set up sugar mills through abolition of Sugar Factories Establishment and Enlargement Act 1966.
The government would invest in efforts to improve seed technology and study beet sugar cultivation and the relevant authorities would initiate programmes for seed improvement to enhance sucrose content in sugarcane and increase per hectare yields as well as consume less water.
For improvement in forecasting and provision of accurate data of sugarcane crop, Suparco and provincial crop reporting departments need to collaborate and employ modern techniques for accurate reporting of data about sugarcane crop production to the federal government.
It also suggested a cost-benefit analysis of cultivation of different crops to review relative importance of crops for Pakistan viz-a-viz area under cultivation to enable the government to devise required interventions.
The State Bank of Pakistan would be required to issue advisory to commercial banks to inspect their pledged sugar stocks, and to verify, their presence with the collaboration of the Federal Board of Revenue and cane commissioners.
The Securities and Exchange Commission of Pakistan would be required to amend relevant laws for audit of cost accounts sugar mills.
Published in Dawn, December 16th, 2021