LAHORE: The removal of restrictions on export of half of the projected sugar surplus (about 0.5 million tons) from the current harvest is estimated to fetch $300 million, lift pressure on its domestic prices and enable the millers to lift the new bumper cane crop and pay off banks and growers.

The sugar industry, which started the current harvest with a carryover stock of 0.6 million tons, expects to produce 4.8 million tons sugar by the end of the season in April, creating a surplus of one to 1.2 million tons. The expectation of surplus production has brought huge pressures on its domestic price, which fell by almost Rs15 per kilo from early November.

“If the prices keep sliding we will not be able to recover our cost and pay off the growers and the banks,” said Mr Javed Kayani, chairman of the Pakistan Sugar Mills Association (PSMA). “The government should help stabilise market by procuring at least half a million tons of sugar to replenish its buffer stocks and allowing the mills to export the rest of surplus,” he said.

He insisted that the mills would still be left with exportable even if the government procures the promised quantity of 0.7 million tons. Hence, it was important that the restrictions on sugar export be lifted to enable the mills to overcome their liquidity crunch and pay off their growers and banks.

Besides the expectations of surplus production, the Economic Coordination Committee’s decision last week to scrap the November tenders for the procurement of 0.2 million tons of sugar after 40 days of accepting the bids has also increased pressure on the sweetener’s domestic prices and created uncertainty in the market.

Though the ECC has decided to float fresh tenders for buying sugar through Trading Corporation of Pakistan (TCP), it is not clear when the new bids will be invited.

“We want to government to continue buying sugar from us until it replenishes TCP buffer stocks of 0.7 million tons or equivalent of two months’ domestic requirements. But we are not sure as to when will the TCP start procurement of the sweetener. Nor are we certain about the government plans to purchase more at a later stage to help us clear the surplus and stabilise the market,” Mr Kayani told Dawn on Tuesday.

The millers claim that the scrapping of the November bids has caused the mills a loss of almost Rs3 billion. “If the government does not feel like procuring surplus sugar from the local mills for its buffer stocks it should allow us export it to release the pressure on its domestic prices,” Mr Kayani said.

He said the price differential of Rs34 a kilo in the domestic and international price of sugar would help the millers cover their losses caused by low prices in the local market in addition to earning huge foreign exchange at a time when the country was to start repayment of International Monetary Fund (IMF) loans from February.

“If we export half a million tons of sugar now, we will be able to earn $300 million, which forms 25 per cent of the first $1.2 billion IMF repayment installment.”

He said the government would save almost Rs7 billion if it locally procured sugar for replenishing its stocks. “With the domestic prices already bottomed out, it is a good opportunity for the government to buy local sugar,” he argued.