LAHORE, 21: The government has assured sugar producers to seriously consider their proposal to lift 200,000 tons of their surplus produce through the Trading Corporation of Pakistan for creating a buffer in order to help them dispose of their unsold stocks to make way for the start of early crushing next month.
“The Pakistan Sugar Mills Association had tabled the proposal at a meeting with Finance Minister Shaukat Aziz, Commerce Minister Humayun Akhtar and State Minister for Agriculture Sikandar Bosan in Islamabad on Friday,” a PSMA official told Dawn here on Tuesday. The PSMA was represented by its central chairman Sikandar Khan and provincial chairmen from Punjab and Sindh Javed Kayani and Shunaid Qureishi.
The PSMA has actually proposed a buffer stock of 400,000 tons, demanding that the government should lift half of it before the end of this month from their current stocks and the remaining half next year.
The meeting was called by the government in order to listen to the viewpoint of the producers, discuss solution to the problem of surplus sugar, and convince them to start sugarcane crushing in November in the aftermath of their threat to delay it till mid-December. The meeting also reviewed the possible impact of the delay in the commencement of crushing on wheat sowing.
The producers contend that they will have surplus stocks of at least 436,000 tons worth about Rs8 billion on November 1, which makes it “economically unviable for them to start crushing before mid-December”. In Sindh, they say, the producers still have to make payments to growers for the last year’s crop because of the liquidity crunch caused by unsold stocks and lower retail prices in the domestic market. In Punjab, the producers claim to have made 98 per cent payments by borrowing from banks against their unsold stocks.
“We told the ministers that the unsold surplus stocks have not only depressed sugar prices, but have also caused liquidity crisis for smaller mills, particularly in Sindh. We just cannot commence sugarcane crushing as long as we are not helped by the government in the disposal of the surplus at the earliest possible. Crushing can begin in the second or third week of the next month only if the TCP comes into the market and lifts 200,000 tons of sugar by the end of this month,” the sources said.
They said the PSMA had also assured the government that it would swap sugar lifted by the TCP this year with fresh produce next year in order to save it from any losses on account of possible deterioration in quality.
The government would have to set aside about Rs3.13 billion this year if it agrees to the PSMA proposal to lift 200,000 tons of sugar at a rate of Rs15.62/kilo (minus sales tax) to create the buffer.
While the producers are said to have apprised the ministers of a further surplus of around 600,000 tons next year in view of the bumper sugarcane crop, Mr Bosan is claimed to have disputed this figure. “The state minister stated we would not produce more than 3.5m tons because of a short sugarcane crop. However, when we referred to a recent USDA report that has estimated production to be around 4.03 million ton next year, others (ministers) did seem to agree with us,” the PSMA official claimed.
It, however, may be pointed out that the PSMA fears a shortage of sugar in 2005 as it believes that many sugarcane growers could switch over to cotton in view of its unprecedented high rate this year. “Then we will need buffer stocks to avoid importing sugar,” says the PSMA official.
“If the government does not agree to our proposal, we will not only be constrained to delay crushing to mid-December, but also to begin controlling our production,” the PSMA official warned.
Under the law, the sugar factories are bound to continue their crushing operations as long as the sugarcane crop is standing in the fields. Under the law, they also cannot delay crushing beyond November 30.