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Sugar industry of Sindh is currently in a critical financial crisis due to high cost of sugar production, sharply contrasted by continuously plummeting sugar prices due to huge load of excessive availability of sugar, accentuated by largest imports at 1,500 million tons during 2005-06 season and followed by additional 587,000 tons during 2006-07.
Sugar production prospects are promising at four million tons for the on-going 2007-08 season, matching with the domestic sugar consumption. This is to leave huge inventory looming large at the end of the current season.
Sugar demand by inelastic consumption characteristic is stretched over a year long, while sugar production takes place in about four months, piling up stocks at 17 percent of production rollout per month, adding up to 68 percent by end of sugarcane crushing campaign. This is of telling stress in managing finances and bear significant debt-service.
Sugar wholesale price currently is pitched at the lowest of Rs 22 per kilogram which includes Rs 3.15 of sales tax and Rs 0.21 of federal excise duty, leaving net revenue of Rs 18.64 per kilogram with the sugar mills as against verified cost of production at Rs 25.84/kg excluding sales tax.
This incurs a loss of Rs 7.20/kg. The current sugar price is the lowest of the past three years and is seen on a receding run, as sugar flow keeps on till April next. This critical situation as the season keeps on, is daily deepening the financial crisis.
The mills have exhausted finances and will shortly be confronting with no funds to pay for sugarcane supplies which is bound to bring the sugar industry to a grinding halt.
Pakistan Sugar Mills Association-Sindh Zone has informed the Sindh Government as well as the Federal Government authorities from time to time about the alarming situation that has emerged and urged them for a positive intervention to avert the crisis turn the worst.
PSMA-SZ apprehends that without the government support, sugar industry of Sindh cannot continue its on-going sugarcane crushing campaign in a fast deteriorating financial position zeroing its cash flows.-PR

Copyright Business Recorder, 2008

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