The federal government's inability to contribute its share of freight subsidy on export of sugar, due to financial constraints, has reportedly increased suffering of sugarcane growers who are already under stress. The sugar industry in Punjab, Sindh and KP has already exported 1.25 million tons of sugar out of 2.0 million tons approved by the Economic Coordination Committee (ECC) of the Cabinet.
According to the State Bank of Pakistan (SBP, federal budget for sugar subsidy support has been exhausted, whereas, SBP had ample available budget of Punjab and Sindh's share. However, disbursements for provincial government could not be made as the agreed procedure is to disburse the payment of federal and provincial shares jointly.
Besides, claims received from Khyber Pakhtunkhwa (KP) are not being processed as KP government has still not confirmed as to whether they want to disburse their sugar freight support share directly or through SBP. In case KP government confirms the subsidy through Commerce Division, the claims will be processed accordingly.
Federal government has made available a budget of Rs 600 million ( Rs 100 million on January 2, 2018 and Rs 500 million on February 22, 2018) whereas Punjab allocated Rs 3.462 billion ( Rs 1.694 billion and Rs 2.2 billion ) on January 30 and on March 12, 2018 and Sindh Rs 1.0 billion on February 15, 2018. SBP documents reveal that it received 2,596 claims for payment of federal government's share of Rs 3.6274 billion in freight subsidy, of which SBP has cleared 566 claims of Rs 599.242 million till February 21, 2018, whereas claims of Rs 3.028 billion were pending.
The Punjab-based sugar mill submitted 1,911 claims of Rs 2.3144 billion, of which 458 claims amounting to Rs 433 million were cleared whereas 1,453 claims of Rs 1.88 billion were pending. Sindh-based sugar mills which are enjoying Rs 20 per kg ( federal government Rs 10.70 per kg, Sindh government Rs 9.30 per kg , submitted 682 claims amounting to Rs 1.3112 billion of which 108 claims of Rs 166.4 million were cleared, whereas 574 claims of Rs 1.145 billion were pending.
Sugar industry maintains that the government is responsible for this chaos and claims it approached the then Commerce Minister in October 2016 and forewarned him about surplus sugar and its repercussions. PSMA at that time sought permission to export one million tons of sugar when international market was at a level of $ 540 / 550 per metric ton and no subsidy was required at that time but to the industry's dismay and detriment of the growers the industry was granted permission to export 225,000 tons and subsequently a quantity of 200,000 tons was further allowed till March 2017.
The industry further stated that in September, 2017 Prime Minister Abbassi took notice of the situation and allowed an initial export of 500,000 tons with export subsidy as during this intervening period international market declined to a level of $ 350 per ton.
The industry maintains that this was the brainchild of the then Commerce Minister who wanted to annihilate the industry without realizing that growers would face dire consequences and repercussions.
However, on the other hand, some of the government functionaries argue that export of sugar was allowed by the ECC with the intent that sugar mills would have enough liquidity to clear the outstanding dues of the growers. However, such payments were still outstanding despite the sugar mills having a cash flow of about Rs 40 to Rs 50 billion through export of about 0.750 million tons of sugar.
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