KARACHI, July 7: With a huge opening inventory of around 1.02 million tons of white refined sugar with the industry the new crushing season (2007-08) is likely to be delayed by around three months.

According to industry sources, after around 3.518 million tons production during the current season (2006-07) total available stocks of sugar in the country stood at 4.828 million tons on adding around 1.310 millions tons held by the state-owned Trading Corporation of Pakistan (TCP) and commercial importers.

After meeting the domestic demand of around 3.8 million tons for the entire season the country is expected to have a surplus of around 1.02 million tons of sugar, which would be the opening stocks for next crushing season, sources said.

Keeping in view the monthly consumption of around 350,000 tons the opening stock of around 1.02 million tons at the start of new crushing season in November 2007, would be sufficient for next three months.

Therefore, the sugar industry feels this would not only dampen sugar prices in the open market thereby making their production unviable, but it would also not be possible for the industry to go into production with huge outstanding working capital taken from banks during the current crushing season.

Pakistan Sugar Mills Association (PSMA) Northern Zone Chairman Iskandar M Khan told Dawn on telephone from Peshawar that the sugar industry faced one of the worst crises that would delay crushing season 2007-08 from November 2007 to January 2008.

He said that in the NWFP the support price for sugarcane during crushing season having average sucrose contents of 8.5 per cent was increased from Rs45 to Rs65 per 40 kg at a time when ex-factory price of sugar was Rs36 per kg.

Conversely, Punjab also increased support price from Rs45 to Rs60 and Sindh from Rs60 to Rs67.

As a result of this the sugar industry in the country refused to commence crushing upon which the government constituted secretaries committee, he added.

Despite many assurances and the commitment made on the recommendations of this committee, Iskandar Khan said, the industry was totally left at the mercy of market forces resulting in huge losses.

He said it was agreed that the sugarcane support price would be absorbed if the ex-factory price of sugar touched Rs31 per kg. But actually what was witnessed that once sugar mills commenced production, the ex-factory price never touched the level of Rs31 per kg, because the TCP released bulk sugar stocks to commercial traders at regular intervals resulting in price crash.

The levy of 15 per cent regulatory duty on gur export and sales tax on sale of gur in the market to create a level-playing field between commercial gur trade and sugar mills was not allowed by the provincial government, he added.

Mr Khan apprehended that sugar mills in NWFP would incur massive losses as the present ex-factory price of Rs25 (mill price Rs21.4 + sales tax Rs3.60) does not even cover the cost of sugarcane.

Due to excess availability of sugar, mills in Punjab and Sindh would also not be able to commence operations in November 2007. Furthermore, many mills may even not be able to start crushing in January 2008, because of heavy financial liabilities.

He said the government policies did not only put sugar industry under tremendous financial and operational constraints but also helped India to capture Afghanistan market.

“Pakistan had been regular supplier of sugar to Afghanistan but after the imposition of 15 per cent regulatory duty on export of sugar we lost the Afghan market to India,” Mr Khan maintained.

He further said that 50 per cent of sugar meant for Afghanistan had now started finding its way in the domestic market, thereby, causing injury to domestic sugar industry.

He urged upon the government to notify Rs40 per 40 kg as support price for sugarcane for the season 2007-08, and allow the industry to defer crushing season for three months. The PSMA chairman also demanded that a high-level committee be constituted to determine the applicability of taxes on commercial gur trade.