Controversy over raw sugar import

It is, indeed, distressing to note that the difficulties on the sugar front continue unabated, notwithstanding repeated attempts at ending it from different approaches over the past several years. This has reference, among other things, to a letter the Secretary General of Pakistan Sugar Mills Association (PSMA), K. Ali Qazilbash, is reported to have sent to the State Bank Governor, pointing to flaws in the issuance of import permits and urging him to re-allocate the quota of duty-free import of 200,000 tons raw sugar, equally among the 78 sugar mills, instead of favouring a few, by allowing 10,000 to 15,000 tons to each of them.
The PSMA move appears to be a prompt reaction to a newspaper report appearing on 12th January, pointing out that SBP had allowed five sugar mills to import 200,000 tons of raw sugar, for which the Economic Co-ordination Committee of the Cabinet had earlier authorised it to issue permits. The press report also had it that PSMA had come to know that the quota of 200,000 tons of raw sugar had already been exhausted and that the parties keen to benefit from it had either submitted fake contracts or no contract at all. However, no contract for purchase of raw sugar has been posted in the international market and no letter of credit opened either.
The PSMA official has also pointed out that the decision to import 200,000 tons of raw sugar was neither accompanied by a definition of raw sugar nor did it make its procurement specific to the PSMA member mills for processing. Taking exception to these omissions, he recalled that a large quantity of refined sugar, disguised as raw sugar, was imported duty-free in the year 2000. To forestall similar cheating this time, the PSMA has asked the Commerce Ministry to ensure that the imported raw sugar should not be of less than 1000 ICUMSA. Incidentally, the association's concern, in this regard, will appear to have been already addressed by the industry-specific procedure SBP has adopted by fixing "International Commission for Uniform Mechanism for Sugar Analysis" at 1,000 for raw sugar import. Moreover, it has been stated that the SBP would strictly monitor the import to ensure that raw sugar of less ICUMSA is not imported, for reasons duly explained in a Business Recorder report, appearing on 13th January. Quoting experts, the report said that the SBP had laid this condition to avert repetition of the sad experience of 1999-2000, albeit from a different thrust.
Irrespective of the validity or otherwise of the points now raised by PSMA, the fact remains the sugar mills have not been happy with the ECC decision from the very beginning. Reacting sharply to it, PSMA had then urged President Pervez Musharraf to intervene in it in the larger national interest, pointing out that otherwise it would appear that policy makers were playing in the hands of vested interests. It had also been contended that the sugar industry had sought such an arrangement and the policymakers had not deemed it advisable to consult the stakeholders before taking the decision, hence terming it unwise. Be that as it may, the ECC decision was, evidently, motivated by a strong urge to provide some relief to the consumer from the mounting pressure on family budgets with an intriguingly sharp rise in sugar prices. The Economic Advisor to the Finance Ministry, Dr Ashfaq Hasan Khan, while elucidating the ECC decision had pointed out that the government had taken strong exception to the increase in prices in the midst of abundance of locally produced sugar, the retail rate having spurted to Rs 24 per kg, the highest recorded in the last three years.
All in all, it made up an emergency, hence calling for urgent measures. In a state of increasing demand, arising from excessive liquidity because of lower interest rate, it could best be tackled by seeking a remedy on the supply side. With that in view, ECC weighed various options, including recourse to the least risky duty-free import of raw sugar by the mills for reprocessing, to begin with. As such, instead of hair-splitting over the ongoing process, all the stakeholders would do well to give a try to this market-oriented approach for the time being.