KARACHI, Jan 17: Sugar mills in the province are facing liquidity problems due to higher sugarcane prices and low return due to falling sugar prices in the open market.

Pakistan Sugar Mills Association (Sindh Zone) Chairman Deoomal A. Essarani told Dawn on Monday that growers were selling cane at Rs200 per 40-kg against the officially fixed support price of Rs127 for the season 2010-11.

He said the tussle between growers and millers over cane price had initially delayed crushing which led to sharp increase in refined sugar prices beyond Rs140 per kg in the retail market.

He said though all the 32 sugar mills in the province were operating but most of these mills were faced with liquidity crunch.

“The high cane prices have threatened the sugar industry’s viability because it cannot sell sugar at prevailing price of Rs65 per kg in the open market,” he said.

He added that the rapidly falling sugar price is pushing the industry into deeper financial crisis as during the last four days the commodity price had declined by Rs4 per to Rs65 per kg from Rs69.

Mr Essarani pointed out that after lifting sugarcane at Rs200 per 40 kg the industry’s selling price came to around Rs72 to Rs73 per kg and it could not absorb Rs8 per kg loss.

Another problem confronting the sugar industry was of poor quality cane resulting in lesser sucrose and recovery. The industry had been offering good quality seeds to growers without charging them extra, but unfortunately the offer had been rejected, the PSMA chief deplored.

There was a time when southern Sindh used to produce best quality sugarcane but now areas like Tando Mohammad Khan, Badin and Thatta were producing extremely poor quality cane.

He said the country hopefully would not have to import sugar this season because production would come to around 3.5 million tons against the total demand of 4.2 million tons.

He said that Sindh was expected to produce around 1.2 million tons and Punjab 2.3 million tons whereas Khyber Pakhtunkhwa little less than half a million tons and after adding inventories held by the Trading Corporation of Pakistan (TCP) the local demand would easily be met.