PSMA's rebuttal (ref. PSMA-022/2008 of February 1, 2008) starts with a premise of 'news item' and "Ab-initio, intro of the news", which by itself, is a start on the wrong foot. The article they refer to is a 'news analysis' and not a 'news item'.
However, to reply to the arguments of the Hon'ble Secretary, PSMA SZ, let us read the third and the last para of their letter together. It will be clear that the "40% price increase (of sugarcane) in 2005-06 and further 12% in 2006-07" is a manifestation of "price of all commodities, services etc having "soared" "during past four years", in PSMA's own words. That should clarify the issue of sugarcane procurement price fixed by the government.
The rest of the PSMA's remarks on page 1 of their letter should have been addressed to the government authorities. The simple consumers of sugar in the country have no control on events all over the globe. But, one thing is clear. The retail prices of sugar.
ACCORDING TO REPORTS HAVE RANGED AS FOLLOWS:
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February 2006 Rs 36 per kg
April 2006 Rs 40 per kg
February 2007 Rs 32 per kg
March 2007 Rs 30 per kg
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This brings out 2 points. First, the sugar mills made huge profits during February 2006 to April 2006, much more than the rise in sugarcane price would justify. Forced by the "bearish" trends in the world prices, they had to scale down their prices, since the government resorted to imports to give relief to the consumers.
The second point is that the world-wide sugar industry is governed by market forces and adjusts its 'offered' prices, by effecting economies in its cost of production. If this does not happen in Pakistan, does it reflect some in-efficiencies in our systems?
Coming to actual cost of production, a margin of error of even 50% was mentioned in the analysis. But to clarify the point, perhaps an audited statement certified by a firm of Chartered Accountants of repute, breaking down the cost of sugar production per ton for individual members of PSMA, under the following headings would clarify the issue;
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a) Direct Cost
Sugarcane Amount Quantity by weight
Labour
Materials
Power
Depreciation
Packing & Handling
Ex-factory costs Sub-Total
b) Indirect costs
Supervision
Management
Other expenses
Financial charges
Ex-warehouse cost Sub-total
c) Provisions & Reserves
Total cost Sub-total
d) Mark up
Ex-Mill price Total
e) Sales Tax
Wholesale price
Sugar Stocks on hand at
beginning of crushing season production during season
Total stocks
Less closing stock at end of accounting year Gross sales
Percentage of (i) Gross profit & (ii) Net profit on turnover
Dividends paid
Taxes on Income
Profits retained
Period between procurement of supplies of sugarcane and
the date of actual payment to growers
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Note: 1) All kinds of payments to directors/owners, in cash or kind, or included under other headings, should be itemised and separately shown.
2) Items included under *Other expenses, should be shown under broken down sub-heads, identifying the nature of expenses.
3) Regarding sales tax, it may be pointed out that it is NOT an item of cost of production, but a tax on turnover, which is collected by the vendors from the purchasers, and paid into the Treasury.
This exercise, once out in print, will clarify once for all, the question of any errors or misstatements, and clear the minds of all concerned, including this 'scribe'.
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