Banks provide Rs 130 billion as sugar financing this year

The outstanding amount under sugar financing obtained by private and public sector from banks touched Rs 130 billion mark in February this year against Rs 83.3 billion in February last year. Sources in the banking sector told Business Recorder on Wednesday that followed by a bumper sugarcane crop and higher sugarcane rates, public and private sectors secured more financing for the current crushing season than the previous season.
The country harvested a sugarcane crop of 60 million tons during the current season. Cumulatively, the total pledged sugar stocks surged to 2.807 million tons, up from 1.895 million tons, sources said. During the past year, an increase of 69 percent or Rs 32.8 billion was registered in the amount of sugar financing obtained by sugar mills.
The overall outstanding amount under sugar financing secured by private sector mounted to Rs 80.5 billion as on February 12 this year against Rs 47.7 billion on February 12 last year. According to sources, banks pledged sugar stocks of 2.45 million tons till mid February this year against 1.517 million tons in February last year. Banks will release the pledged sugar stocks as soon as sugar mills repay their dues.
The public sector also obtained huge financing for procuring sugar from domestic mills. Funds obtained by the Trading Corporation of Pakistan (TCP) for sugar financing posted an increase of 40 percent during the past year. Banks pledged 357,031 tons of sugar procured by the TCP against advances amounting to Rs 49.9 billion at the end of February this year. TCP had pledged 378,000 tons of stocks against obtaining a financing of Rs 35.6 billion in February last year.
Sources said that the total outstanding amount also include dues of last crushing season, adding that TCP as well as sugar mills had not yet retired sugar financing acquired in the crushing season of 2011-2012. Normally, the period between October and March is considered to be sugarcane crushing season in which sugar mills' obtain loans from banks for the purchase of sugarcane. Borrowers are also required to retire financing for securing new loans. At present, millers are facing the issue of depressed sugar price, as the price of the commodity is on the decline in the domestic market because of higher production and slow demand.
Recently, the TCP procured 330,000 tons of sugar from domestic mills to provide financial relief to the cash-strapped sugar mills. The federal government also allowed mills to export as much as 200,000 tons of sugar to offset the effects of a glut in the domestic market because of which millers were not getting a better price.