The Economic Co-ordination Committee (ECC) of the cabinet, which is scheduled to meet on Tuesday (tomorrow), will approve 0.4 million tons sugar procurement/export plan. Recently, President Asif Ali Zardari met with a delegation of Pakistan Sugar Mills Association led by its Chairman, Javed Kayani and directed the Ministry of Industries to get the sugar procurement/export plan approved immediately.
Ministry of Industries, in its summary explained that a meeting of the Sugar Advisory Board (SAB) was held on March 12, 2012 in which it was suggested that a case for domestic purchase of 0.4 million tons of sugar by TCP will be considered after the crushing season ends and clarity regarding sugar production figures emerge.
According to the summary, sugar data is compiled on the basis of reports received from Provincial Cane Commissioners. On 3rd May, 2012 sugar production of 4.67 million tons has taken place which is touching the highest ever figure of 4.7 million tons in 2007-08 season. At the beginning of the current crushing season (end October 2011) domestic sugar stocks stood at 0.9 million tons. Left over stocks with TCP in addition were 0.15 million tons.
In the last three years sugar consumption has on average been 3.8 million tons. Sugar is price elastic and hence taking 4.2 million tons with higher consumption is anticipated at the rate of 0.350 tons per month and higher Ramazan consumption of 0.4 million tons.
The MoI maintains exports of the poor deal to growers due to bumper sugarcane crop and liquidity issues demand a timely decision.
The millers are confronted with liquidity issues in spite of the government procuring approximately 0.478 million tons from the domestic market.
The summary further stated that wholesale price of sugar in Jodia Bazar, Karachi, as on March 03, 2012 was 51.50/kg, in Akbari Mandi, Lahore was Rs 51.90/kg, while Retail price as quoted by FBS on the 3rd May 2012, was Rs 54.90/kg. International price of white sugar is US $559/ton (Rs 72.02/kg).
Fortnightly report from the State Bank of Pakistan (SBP), on financing to sugar mills on April 25, 2012, reveals that mills pledged 2.48 million tons sugar with banks against advance of Rs 97.62 billion. While on the same date in 2011 mills had pledged 2.20 million tons sugar pledged against the advance of Rs 96.3 billion.
The MoI maintains that sugarcane crop is cyclical in nature and there are three lean years for sugar production after bumper year due to factors like growers getting poor deals and going for other crops that fetch better price.
According to the documents, TCP has procured 4,78,000 tons of sugar from the domestic market (378,000 tons @ 46,250/ton and 99,300 tons @ Rs 45,720/ton) and has made a payment of Rs 21.9 billion to the sugar mills.
Export was allowed on the request of sugar mills. 95,603 tons stands exported bringing in $57.233 million.
Of 3.62 million tons are sufficient till 13 March 2013. As new sugar will be entering the market in the first week of December domestic sugar stocks are sufficient.
As per National Sugar Policy 2009-10, Sugar Reserves of 0.5 million tons are to be maintained. The USC sold 0.381, 0.482 and 0.430 million tons sugar in 2008-09, 2009-10 & 2010-11. The reserves are also supplied to CSD, Navy, and Army. Annual Disbursement by TCP amounts to around 600,000 tons. At this point TCP has 0.448 million tons with it which will suffice till the end of 2012 and require to be replenished.
The following options are proposed for the consideration of the ECC: (i) export of a further 0.2 million tons may be allowed according to the earlier modus operandi used by State Bank of Pakistan or TCP may procure 0.2 million tons from the domestic market with intent to export; and (ii) TCP may also purchase a further 0.2 million tons sugar from the domestic market at a rate which is much below the international price to build domestic reserves.
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