KARACHI, Oct 6: Sugar mills have cautioned that there may be an expected increase in sugar prices owing to upward revision in the minimum support price of sugarcane for the season 2008-09.

The Pakistan Sugar Mills Association (PSMA) has hinted that during the new crushing season, the price of white refined sugar may go up to Rs38 per kg from the current price of Rs32 per kg in the open market.

The millers pointed out that in view of an increase in the cost of production of sugarcane due to abnormal increase in the prices of fertiliser and fuel, coupled with an increase in other cost elements, it was inevitable for the Sindh government to enhance minimum support price of sugarcane to Rs81 per 40kgs.The millers argued that a 30 per cent increase in sugarcane price over the previous year when it was fixed at Rs67 and later revised to Rs63 per 40kg was bound to have an impact on sugar price.

The raw material (sugarcane), consumed by the industry in producing white refined sugar, constitutes over 75 per cent of the manufacturing cost which means that there would be an increase of around 30 per cent in the price based on cane support price, the PSMA stated.

The millers further stated that minimum wages of unskilled workers have been raised from Rs4,500 to Rs6000 per month giving an impact of 133 per cent rise in wages. Similarly, financial charges have almost increased by 150 per cent as compared to last year.

There is a general increase in other elements of cost, especially of petroleum products. All these factors would have an added cost impact on production of sugar which would ultimately have to be born by consumers.

The PSMA further stated that the sugar industry has little role in determining sugar price because almost 92 per cent of cost elements (75 per cent cost of raw material and 17 per cent sales tax and special excise duty) are beyond the control of the industry.

The sugar industry had been demanding that the support prices should be based on percentage yield which would not only be a just system but would also encourage growers to cultivate quality cane with higher yield of sucrose.

A PSMA spokesman told Dawn that the country is likely to face sugar shortage next season as consumption has increased to 4.2 million tons. Against this, he stated the expected production next season could be close to 3.5 million tons.

He demanded that the government should immediately allow import of raw sugar and impose a total ban on import of refined sugar.

It would help domestic industry keep its operations and ensure sugar supply to the consumers.

The PSMA spokesman further said that the government should also remove sales tax on sugar as it is an essential commodity. Besides, bringing down prices of sugar, ST removal would also help check tax evasion.

He reiterated that there should be a ban on manufacturing of gur which mostly makes its way to Afghanistan and results in lesser sugar production.