ECC scraps plan to import 0.5 million tons of raw sugar

The Economic Co-ordination Committee (ECC) of the Cabinet on Tuesday formally scrapped its plan to import 0.5 million tons of raw sugar through the Trading Corporation of Pakistan (TCP), official sources told Business Recorder. The Federal Cabinet on November 4 decided to import 500,000 tons of raw sugar and 500,000 tons of refined/white sugar through the TCP during the current season.
However, the TCP did not agree to import raw sugar as its cumulative cost was found to be higher than that of the refined/white sugar. "Raw sugar itself is unfit for human consumption and as per Pakistani standard for raw sugar, prescribed by the PSQCA, only raw sugar of minimum 2,000 icumsa can be imported, vis-à-vis maximum 80 icumsa, for white sugar. This will entail higher conversion cost to comply with the current PSQCA conversion standards.
It may also be pointed out that specifications of other countries, which import raw sugar, are around 800-1000 icumsa," the sources added. The Cabinet decided that that the TCP, a subsidiary of the Commerce Ministry, would import raw and white sugar whereas raw sugar will be delivered to sugar mills for processing/refining. "The ECC has shown complete agreement with the TCP's viewpoint, and decided not to indulge in the business of raw sugar. Now only the private sector will import raw sugar," said one of the participants of the ECC on condition of anonymity.
"In case the TCP imports raw sugar and delivers it to sugar mills for converting it into white sugar, minimum delivery time from the date of issuance of advertisement in the press for inviting bids (as per the PPRA Rules) will take 13-14 weeks," the sources added.
According to the sources, if the TCP invites bids by issuing an advertisement in the press in the last week of November, then the delivery to the mills will be in the fourth week of February, 2010, which will be the end of crushing season. Raw sugar could only be converted into white sugar during cane crushing season. Therefore, it would not be possible for the mills to convert all imported raw sugar into white as it would be delivered at the end of crushing season, the sources quoted the TCP Chairman as writing to the Industries Minister a couple of days ago.
The sources said that comparative cost analysis between raw and white sugar showed that it would be costlier to import raw sugar and convert it into white by Pakistani sugar mills in comparison to the cost of imported white/refined sugar.
In the international market, the difference between the price of white sugar and raw sugar is about 60-65 dollars per metric tonne, while the difference between the cost of the imported white and the estimated cost of converting to white sugar is 127 dollars per metric tonne (if the customs duty and FED is waived by the government).
The calculation is based on the international prices of raw and white sugar as on November 15. It is clear from this cost comparison that import of raw sugar and converting it into white sugar in the local sugar mills will be costlier in comparison to the import of white/ refined sugar. According to sources, the issue of import of raw sugar by the TCP was discussed in detail with the Minister of Finance in his camp office in Karachi on November 14. After detailed discussion, it was decided that:
-- Raw sugar may not be imported.
-- In case raw sugar is imported, private sector, sugar mills owners and commercial/industrial users of sugar may be allowed to import. The government may facilitate by abolishing customs duty/FED.
-- The Finance Minister also decided that TCP would be directed to import white/crystal sugar. The import will be planned in a manner that the entire quantity is in the country by June 2010.
-- The Ministry of Ports and Shipping will be asked to direct Karachi Port and Bin Qasim Port to allocate priority berthing to avoid demurrage because of a large number of vessels arriving at Karachi Port.
-- The Industries Ministry would direct the Pakistan Sugar Mills Association (PSMA) to import raw sugar.
This proposal is unlikely to be implemented, as the sugar millers are not ready to import raw sugar at expensive rates and sell the sugar at the rates announced by the government, commented one of the mill owners. This leads to the conclusion that the government has to rely on refined sugar import. When contacted, TCP Chairman Saeed Khan confirmed that the ECC had decided not to import 500,000 tons of raw sugar through the TCP, but to allow the private sector to import it. However, the government is expected to give concession.