The Federal government has reportedly scrapped 0.3 million tons of sugar procurement and export plan after sugar mills refused to sell sugar at Rs 48 per kg on the plea that this will be a blatant violation of PPRA rules, well-informed sources told Business Recorder. The Economic Coordination Committee (ECC) of the Cabinet on December 22,2017 had decided that Trading Corporation of Pakistan (TCP) will procure 0.3 million tons of sugar from the surplus stock of the mills, through tendering process, so as to enable them to procure sugar cane from the growers at the prescribed rate and also clear their outstanding dues.
The ECC had also prescribed the following conditions for procurement plan: (i) sugar mills who had defaulted in earlier deals with TCP will not be eligible to participate in the bidding process; (ii) only those sugar mills will be allowed to participate in bidding process, which have started and will be continuing crushing at full capacity. The cane Commissioner of the respective province will certify to this effect; (iii) procurement shall be made on the basis of competitive bidding with an upper limit of 10,000 tons per sugar mill ; (iv) maximum procurement price shall be Rs 48/kg ; (v) payment by the TCP to the sugar mills will be linked to clearance of outstanding dues of the sugarcane growers. 40% payment will be made to mills at the time of procurement (taking over the physical possession of the stocks by the TCP Muqadam) and an additional 40% payment will be made subject to the confirmation by the respective Provincial Cane Commissioner that the dues of the sugarcane growers have been cleared and remaining 20% payment will be made on lifting of sugar from the mill premises for export of the same; (vi) the stocks will be stored in a covered/dedicated warehousing space to be provided by the mill owners within the mill premises that should be secure against any hazards of weather, environment and pilferages; (vii) the mill will replace the procured stocks with the fresh one from time to time; (viii) TCP will export the procured sugar through international tendering process; (ix) Finance Division will facilitate TCP in arrangement of required financing through banks/financial institutions. The total financial cost of the procuring 0.3 MMT of sugar was calculated and approved by ECC as Rs 15.33 billion @ Rs 51.12/kg (Rs 48/kg TCP purchase price+Rs 3.12/kg financing cost); (x) any differential cost/ loss in the procurement and disposal will be borne by the respective provincial government; and (xi) the TCP shall be eligible to receive freight support from the State Bank of Pakistan on export of 0.3 MMT @ Rs 10.70/kg.
According to sources, TCP, in its letter of January 26, 2018, revealed that a tender was floated to procure 0.3 million tons of sugar on January 5, 2018 which was subsequently opened on January 25, 2018 after addressing the apprehensions/reservations expressed by the participants of a pre-bidding meeting held on January 18, 2018. TCP further stated that none of the sugar mills participated in the bidding process on 25.1.2018, rendering the procurement process inconclusive.
On the other hand, Pakistan Sugar Mills Association (PSMA), in its letter of January 30, 2018 addressed to Minister for Commerce Division, conveyed that (a) reference price of Rs 48/kg which was set as a maximum procurement price by the ECC, is against Public Procurement Regulatory Authority (PPRA) rules and (b) payment mechanism of 40%, 40% & 20%, as approved by the ECC, runs counter to the spirit of the whole exercise which was primarily meant to facilitate growers for their payments. PSMA requested that payment mechanism should be 100% advance.
When contacted, a senior officer of Commerce Division told Business Recorder that no further action is being taken as exports by sugar mills are going smoothly and there seems to be no need for procurement and export by TCP.
Asked whether the government has put sugar procurement plan on ice after not receiving any bid from sugar mills, the official replied: "not on ice". The program basically was to help sugar mills offload the surplus sugar stocks during new crushing season. But since sugar mills are now exporting large quantities of sugar themselves, this intervention seems to be no more required".
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