The Trading Corporation of Pakistan (TCP) has formulated a policy to procure and export 0.3 million tons of sugar from mills on the instructions of the Economic Co-ordination Committee (ECC) of the Cabinet, according to which procurement will not be made from the defaulting mills, sources close to chairman TCP told Business Recorder.
The financial implications of the procurement of sugar by the TCP as calculated by the government of Punjab, to be allocated by the Ministry of Finance under Commodity Operation Financing indicates that the total cost of 0.3 million tons of sugar would be Rs 14.4 billion at the rate of Rs 48 per kg plus financial cost for one year Rs 938 million (Rs 312.480 million for 0.1 million tons of sugar for one year). The total cost of 0.3 million tons of sugar would be Rs 15.4 billion.
The sources said, initially the decision to procure sugar from mills was taken at a meeting presided over by Prime Minister Shahid Khaqan Abbasi. The chief secretary Punjab made a presentation on the issue of sugar industry. However, this decision was endorsed by the ECC on December 22, 2017.
The sources quoted the chief secretary Punjab as saying that due to surplus production of sugar, the mill owners have shown their inability to purchase any more sugarcane from the growers at the prescribed rate and find it difficult to clear their accumulated liabilities due to liquidity constraints. The meeting was also informed that the mill owners' constraints have created resentment amongst the growers which they have demonstrating in various manners like protests, rallies etc.
The chief secretary was of the view that in order to arrest this unrest amongst the growers and ensure price stabilization of sugar in the local market, the government's (TCP) intervention has become inevitable.
According to sources, Prime Minister Shahid Khaqan Abbasi, after thorough discussion, directed that following proposals be submitted to the Economic Co-ordination Committee (ECC) of the Cabinet: (i) the TCP would procure 0.3 million tons of sugar from the surplus stock of the mills, through tendering process, so as to enable them to procure sugarcane from growers at the prescribed rate and also clear their outstanding dues; (ii) the TCP shall export the procured sugar through international tendering process and; (iii) in case of loss, it will be borne by the respective provincial government.
Accordingly, in compliance with the directives of the Prime Minister, the TCP has proposed the procurement of 0.3 million tons of sugar from millers on the following conditions: (i) the defaulting mills will not be eligible to participate in the bidding process; (ii) only those sugar mills may be allowed to participate in bidding process which have started crushing. Cane commissioner of the respective province will issue a certificate to this effect; (iii) sugar procurement quota for the provinces may be fixed on equitable basis, ie, number of sugar mills started crushing in each province; (iv) in case the lowest bidder does not have adequate surplus sugar stock to provide the requisite quantity, then the next immediate higher bidder will be offered an opportunity to match the rate with the lowest one and so on, for which exemption from PPRA Rules regarding matching shall be required; (v) the payment by the TCP to the sugar mills would be linked with clearance of the outstanding dues of the sugarcane growers. Seventy percent payment will be made to the mills at the time of procurement (taking over the physical possession to the stocks by the TCP Muqadam), an additional 10 per cent payment to be made subject to confirmation by the respective provincial cane commissioners that the dues of sugarcane growers have been cleared and remaining 20 per cent payment will be made on lifting of sugar from the mill premises for export; (vi) the stocks will be stored in a covered/dedicated warehousing space to be provide by the mill owners within the mill premises that should be secure against any hazards of weather, environment and pilferages and; (vii) the mill will replace the procured stock with fresh commodity from time to time.
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