An inter-ministerial committee headed by Commerce Minister has, reportedly, recommended enhancement of sugar export quota to 1.5 million tons from 0.5 million tons with a freight subsidy of Rs 10.70 per kg to facilitate timely start of crushing season and ensure payment to the growers, well informed sources told Business Recorder.
The decision was taken by the committee constituted by the Prime Minister on November 14, 2017 sans its convener ie Minister for Commerce, Pervaiz Malik, who is on an official visit to Russia and Belarus. Secretary Commerce, Secretary Ministry of National Food Security and Secretary Ministry of Industries and Production are members of the committee.
"We have recommended to the Economic Coordination Committee (ECC) of the Cabinet that sugar export quota may be enhanced from 0.5 million tons to 1.5 million tons with freight subsidy of Rs 10.70 per kg," said a senior government official on condition of anonymity.
The amount of subsidy will be equally shared by the federal and provincial governments on 50:50 basis as already approved by the government. Trading Corporation of Pakistan (TCP) recently informed the federal government that an allocation of Rs 6.238 billion is available under the Commodity Operation Finance (COF) for the current quarter ie from October to December 2017 which will be inadequate for procurement/export of 1.5 million tons of sugar hence the federal government will have to provide additional funds for accomplishing the task.
The agency further stated that it has adequate capacity and experience to export commodities and procure sugar from local sugar mills. Recently, on the directives of federal government, the TCP exported rice to Niger, Cuba, China and Sri Lanka. TCP has also procured sugar from local sugar mills on various occasions. However, the Commerce Ministry is not supporting procurement of sugar through TCP.
Prior to the sugar committee meeting, Pakistan Sugar Mills Association wrote a letter to the Minister for National Food Security and Research, Sikandar Hayat Bosan, Minister for Commerce and Textile Pervaiz Malik, Secretary Commerce and Secretary Industries and Production in which sugar industry gave reference to Sugar Advisory Board's (SAB) meeting held on October 27,2017 wherein Pakistan Sugar Mills Association (PSMA) submitted that the amount of export rebate should be commensurate with the cost of production and the prevailing international price of sugar which has plummeted due to a glut like situation.
According to the letter, a copy of which is available with Business Recorder, a meager quantity has been sent by sea so far whereas for disposal of bulk quantity it is imperative to ensure exporters' ability to at least clear payments to sugarcane growers.
According to the industry, the situation gets aggravated when there are intermittent restrictions on the Pak- Afghan border due to security concerns. Unfortunately, with the current subsidy determined at Rs 10.70 per kg on cascading mechanism basis, it will not be possible to export sugar in large quantities to the detriment of the growers and the industry.
PSMA had requested the three Ministries to recommend to the ECC an export subsidy of Rs 19 per kg as per legitimate demand raised by the sugar industry in view of support price of sugarcane fixed at Rs 180/40 kg.
The industry has claimed that it has already submitted its cost of production of Rs 62.96 per kg inclusive of tax based on evaluation made by the provincial governments. Moreover, in the previous notification a price benchmark of Rs 54.87 per kg was adopted by the ECC to stop further exports which is whimsical and devoid of any rationale. The PSM requested that restriction on exports should only be considered once the ex-mill price exceeds Rs 69 per kg allowing a return of 10 per cent to the shareholders.
"Sugar industry is under tremendous pressure from the provincial governments and the growers to start crushing. But it is not possible without a coherent export policy for disposal of 1.5 million tons foreseeable sugar surplus in 2017-18 before commencement of new season as on current sugar price of Rs 47-48/kg the industry is already selling at a loss and mills are already in default to financial institutions," the industry said in the letter.
According to Punjab government last year, the area of sugarcane cultivation was 1.95 million acres which has now increased to 2.13 million acres, which implies more sugar is expected in 2017-18. The Punjab government is likely to face two problems: (i) next crop is ready for crushing; and (ii) the payment to growers for the next year will be delayed if unless how much to export of the surplus is decided now. The Punjab government has already fully endorsed that 1.5 million tons of sugar must be allowed for exports.
Sindh government has conveyed to the federal government that every year area under cultivation of cane rises by 25000 acres and cultivation of cotton is reduced. The cotton belt has started converting into sugarcane growing area. The Sindh government stated that 1.8 million tons of sugar be allowed for exports with rebate of Rs 18 per kg on 50:50 sharing ratio by the federal and provincial governments.
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