Trading Corporation of Pakistan (TCP), has, reportedly demanded one billion rupees from the federal government as subsidy to sell 100,000 tons of sugar to Utility Stores Corporation (USC), the raison d'etre for shelving sugar procurement plan, well informed sources in TCP told Business Recorder.
TCP, in its comments on the upper limit of sugar purchase price at Rs 60 per kg said that the upper limit of Rs 60/- per kg (exclusive of taxes) would imply that the total cost to be charged to USC will be around Rs 70/- per kg. Sales Tax @8% and Central Excise Duty @ 2.5% will bring the ex-mill price to Rs 66.30 per kg. TCP's incidentals and mark up of Rs 3.52 per kg, added to ex-mill price will bring the price to Rs 70/- per kg, at which USC will be invoiced. Accordingly, subsidy of Rs 10/- per kg on 100,000 MT will be Rs 1 billion.
On the issue of payment to growers, TCP agreed that to ensure that payment to the selling sugar mills reaches the growers TCP would have to pay 80 percent initially and, upon receipt of certification from Cane Commissioners' that payments had been made to the growers, release the remaining 20 percent.
Ministry of Industries confirmed to the ECC that total production of sugar during 2010-11 was 4.17 million tons, out of which 1.85 million metric tons is in stocks which would be sufficient till December, 2011 keeping in view monthly consumption of 350,000 tons. Additionally, TCP has stocks of 0.3 million tons for supply of USC, Army/ Navy and Canteen Store Departments for their monthly requirement of 40, 000-50,000 tons and additional quantities required during Ramadan.
According to sources, TCP was assigned to procure 100,000 tons of sugar in two instalments. It was suggested that two tenders be floated on June 1& July1, 2011, meeting PPRA rules requirement of 15 days time for response. The two tranches would then be allocated to USC for their monthly lifting directly from these mills.
TCP has also proposed to revise contract including imposing 100 percent penalty along with mark up @ Kibor + 2.75 percent payable on principal. The contract also required the mills to provide five percent bid bond which would be converted into performance guarantee after being successful. The guarantee also included a clause asking suppliers/ millers to furnish post dated cheque(s) for the full quantity of stocks sold as guarantee.
This would not involve any additional financial cost. This was suggested as additional safeguard for government's interest as dishonouring of cheque is now cognisable offence. The sources said TCP had agreed to keep the purchased sugar at the mills in a covered warehouse. Custody of stocks would have to be maintained by Muqaddams to be appointed by the Corporation.
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