LAHORE, Sept 22: Sugar mills are facing difficulty in offloading their existing stocks of around 650,000-700,000 tons since the beginning of this month because of heavy sale of imported sweetener by the TCP at a reduced, subsidised price of Rs30.50 per kg, creating a situation that, millers say, may push the commencement of the crushing season into next year.

“The Trading Corporation of Pakistan, operating though the Utility Stores Corporation (USC), has virtually taken over the market since the start of this month, crashing the prices to the lowest in many months that makes it difficult, rather impossible for the mills to offload their stocks,” a leading miller told Dawn on Friday. “We are unable to sell our stocks even at the price of Rs32 per kg because the TCP is selling its sugar at extremely low rates.”

Until the end of August, the TCP had been intervening in the market by selling 33,000 tons of sugar at the subsidised rate of Rs27 per kg through utility stores to individual consumers and another 50,000 tons at Rs34 per kg directly to retailers through the USC. “Even this left some room for the mills, as well as private importers to sell their stocks to the tune of 237,000 tons each month, with the total monthly consumption in the country standing at 325,000 tons,” said the miller.

However, the corporation further reduced the price for retailers to Rs3.50 per kg, removing the quantitative restrictions on the purchase of the sweetener by the retailers and allowing any individual to purchase a truckload from the start of September.

“The TCP’s changed policy has snatched away the large consumers like confectioners and beverage companies from the mills owing to the availability of the cheaper sugar, making it impossible for the millers to sell their stocks,” said an official of the Pakistan Sugar Mills Association (PSMA). He claimed that total sales of the mills during this month would not cross the figure of 50,000 tons.

“The storage expense being incurred by the mills on their piling stocks had increased their overall production cost,” he said, adding that the production cost of the mills in Punjab, excluding those in Rahim Yar Khan, had reached Rs40-42 a kg if the financial charges incurred on the storage of unsold stocks were also taken into account. “The situation in Rahim Yar Khan and Sindh was a little bit better because of the higher glucose content recovery during crushing.”

The PSMA claims that the total unsold sugar stocks in the country at present were in excess of 1.65 million tons, with 650,000-700,000 tons of the sweetener piled up at the mills, another 800,000 tons (including the quantities on their way to Karachi) imported by the TCP, and 200,000 tons or so still lying with the private importers.

“With the monthly consumption in the country standing at 325,000 tons, all the three players can together manage to reduce their combined unsold stocks only to 1-1.1 million tons over the next two months (Oct-Nov), creating a situation that doesn’t allow the mills to commence crushing on time unless the government takes measures to help them sell their unsold stocks and put in place policies that should remove the pressures on the sugar prices and allow the producers fair returns,” the PSMA official maintained.

He proposed that the government must stop the TCP from bringing its stocks into the market to allow the mills some room to offload their stocks over the next couple of months. “We do not object to the provision of subsidised sweetener at the utility stores for the benefit of the consumers from the poorer segments of society. We are only demanding that it (TCP) should stop selling its stocks to large consumers at the highly reduced rates.”

He said the government should tell the TCP to create a “buffer stock” to be released in times of shortages next year, adding that total production has been estimated to be 3.5 million tons next year against a yearly domestic requirement of 3.9 million tons. Moreover, he said, the government should impose 20 per cent regulatory duty on the import of sugar in future to discourage further import of the sweetener.

“Unless the government rectifies its past policies that have created a crisis-like situation for the sugar mills, making them suffer huge financial losses, it will not be possible for us to start crushing even in December. How can we start crushing when we already have huge carryover stocks piling up at our mills? If the TCP doesn’t stop bringing its sugar stocks in the market at its current prices, the mills will not be able to sell their piles even in the next four months and commence next crushing before mid January,” the PSMA official warned. He said the impending delay in the next crushing season would be a very bad news for the sugarcane growers as well as for the government in view of the forthcoming general election in 2007.