Sugar Advisory Board (SAB), an inter-provincial body, headed by Secretary Industries and Production, Khizer Hayat Gondal, on Wednesday recommended export of additional 1.2 million tons of surplus sugar with appropriate subsidy to be determined by the committee headed by Commerce Minister, well-informed sources told Business Recorder.
According to the final figures presented to the meeting, total production in Punjab stood at 4.327 million tons, Sindh 2.230 million tons, KPK 0.490 million tons, totalling 7.047 million tons and with addition of carryover stock of 0.950 million tons, total stock will be 7.997 million tons. However, after excluding sugar export of 0.425 million tons and annual consumption of 5.100 million tons, balance would be 2.427 million tons. The Board was informed that after excluding strategic reserves of 0.630 million, total surplus will be 1.8 million tons. The sources said Javed Kayani, Chairman PSMA, presented a detailed report at the SAB meeting relating to issues of sugar industry. The meeting was well represented by all three zones of PSMA: Punjab, Sindh and KPK. PSMA gave final production figures and insisted that the permission to export 1.5 million tons must be given to the sugar industry without any limitation of timeframe. The issue was also brought to the notice of Secretary Commerce in his meeting with PSMA and he agreed that export of sugar should not be time bound.
Sugar industry also contended that permission to export sugar should have been given at the beginning of the season when international market was around $540 and the industry could have exported the entire quantity without seeking any subsidy. Twice the Commerce Ministry without understanding the repercussions curtailed the quantity of export to the detriment of growers and member mills lost the opportunity to avail good rates to sell sugar.
Sugar industry argued that due to a decline in the international market the industry should be given export rebate and an incentive like SRO 77, which was to encourage export and to avail reduced rate of sales tax of 0.5% against corresponding local sales. It was also proposed that a cascading mechanism may be adopted in view of the international market with a benchmark price of $530, and $10 reduction in the export price should warrant a subsidy of Re. 1 per kg; similarly for the current level of $450 the subsidy amount comes to Rs 8 per kg which can be reviewed every month. Sugarcane price is fixed at Rs 180 and the industry is bound to crush the entire sugarcane crop; therefore it is the responsibility of the government to facilitate resultant surplus to ensure payment to sugarcane farmers.
The issue of assessable value at 60 rupees per kg was also discussed with a request to FBR to rationalize the sugar rate for purposes of sales tax. Currently, the sale to registered individual's is subject to 8% ie, Rs 4.80 per kg and for unregistered person it is 10% ie, Rs 6.00 kg which the industry is finding difficult to pay in view of the reeling local market price. After defraying the amount of sales tax from the current sale price of 51/- industry is left with Rs 45 which does not even cover the amount of sugarcane content in the price of sugar. The industry's break-even is Rs 64/kg, it is therefore imperative that surplus sugar is exported to reduce the over-supply. Chairman also mentioned that due to this situation in the past few years nine bankruptcies were reported. Therefore, government must address the problems of sugar industry. It was also stated that there is going to be an even bigger sugar production next year which may be around 8 million tons so the government must take a rational decision to ensure the surplus is exported.
After a detailed discussion, SAB recommended export of 1.2 million tons with an appropriate subsidy to be determined by the committee headed by the Commerce Minister. Sugar industry also requested Secretary Industries and Production to release TDAP rebate as industry is facing a liquidity crunch.
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