PSMA justifies high sugar price

The tight supply situation of sugar in the world market and Pakistan's assertion for unlimited imports pushed the prices of the commodity up further. Its impact was bound to reflect in the domestic market, more so because the landed cost of imported sugar, at about Rs 23 per kg, became the benchmark, a statement of Pakistan Sugar Mills Association said on Tuesday. The world sugar market prices' firming up coincided with Government of Pakistan allowing imports, without quantitative restraint. On average, international sugar price per ton for October, 2004, was $245.
It jumped to $260 per ton for January, and to $266 for February, dipping to $261 for March, 2005.
Sugar price trend has been a cause of concern to the government, and Pakistan Sugar Mills Association has regretted that it has not identified the core factor of its recurring loss. As a result, search for a right economic remedy to prevent it has been obstructed.
The statement said that casual approach to the problem, as usual, only led to maligning the sugar industry as being responsible for sugar price increase. But the industry has all along been fighting for its economic survival against all odds, the major being high cost of production and being loaded with sales tax at 18 percent, before the current season 2004-05, and now at 15 percent.
Sugar is the sole food item subjected to a heavy tax load. Invariably, sugar sales price contains sales tax load in its severe form.
In the cost of sugar production components, sugarcane accounts for above 75 percent of the aggregate. Unless its rationalisation is effectively undertaken, the problem of sugar price up and down swing, impacting adversely both the sugar industry and the consumers, would loom large. Sugar industry, it must be taken note of, is processor of sugarcane, and sugar sales links consist of dealers, wholesalers and retailers.
Assuming sugar production cost at Rs 20 per kg, plus an industrial minimum margin of 5 percent, the cost of sale would attract more than Rs 3 of sales tax per kg of sugar. Trade channel and haulage cost, wastage etc to be added to it, with normal 10 percent margin at retail outlets, can give the picture of what have been the elements leading to retail price. On this spectrum the sugar industry holds no control either to suppress or mend. As the government cannot make amends, it seems to be seeking cover in maligning the industry, which is unfortunate, the PSMA statement said.