Federal Board of Revenue (FBR) is likely to share details of tax evasion by the sugar industry with the Economic Coordination Committee (ECC) of the Cabinet on Tuesday (tomorrow), well informed sources told Business Recorder. Finance Minister, Asad Umar, who is also chairman of the ECC and a critic of sugar industry, had directed the Board to gather tax evasion details of sugar mills and submit them in the next ECC meeting. On October 2, 2018, Commerce Division informed the ECC that export of sugar is banned under the Export Policy Order 2016 to ensure adequate supply of sugar at reasonable price in the domestic market. However, the last few years have seen production of sugar in Pakistan surpass its consumption, which created surplus in the market. Hence, specified quantities of surplus sugar have been allowed for export during the last few years to provide liquidity to the sugar manufacturers enabling them to make payments to sugarcane growers in a timely manner.
In order to ascertain the quantum of sugar stocks available in the country, a meeting of the Sugar Advisory Board (SAB) was held on September 11, 2018. During the meeting it was pointed out that sugar production for 2017-18 was 6.617 MMT with a carryover stock of 0.541 MMT from 2016-17. The consumption of sugar till the end of October 2018 was expected to the 5.196 MMT. Hence, the surplus stock of sugar is expected to 1.962 MMT. In view of the availability of surplus stocks of sugar, SAB recommended that after accounting for two months' consumption and retaining two-month reserve stocks, export of 1 MMT of sugar may be allowed.
Commerce Division further revealed that a meeting of the Inter-Ministerial Committee was held on September 17, 2018. The committee endorsed the proposal of Sugar Advisory Board for allowing export of 1 MMT of sugar subject to the following conditions: (i) no freight or financial support will be provided to millers/ exporters by the Federal/ Provincial governments;(ii) Inter-Ministerial Committee will meet fortnightly to review sugar stock, export and price situation;(iii) in case of any abnormal increase in the domestic price of sugar, the committee would recommend to the ECC of the Cabinet for discontinuation of further exports;(iv) export quota will be implemented and monitored by the State Bank of Pakistan on first come first served basis;(v) only those mills will be allowed to export who have cleared the outstanding dues of farmers for sugarcane crop 2017-18 and start crushing at full capacity by November 30, 2018 as required under the Sugar Factories Control Act 1950. In case export quota is granted prior to 30th November 2018, the exporter/ miller shall give an undertaking that it shall commence crushing as required under the Sugar Factories Control Act 1950 and ;(vi) exporters will ship their consignments within 60 days of quota allocation by the SBP in case of non-shipment within the said period, a non performance penalty of 15% will be imposed on the respective miller.
After detailed discussion, the ECC approved that in case of any abnormal increase in the domestic price of sugar, the committee would recommend to the ECC of the Cabinet for discontinuation of further exports and export quota will be implemented and monitored by the State Bank of Pakistan on first come first served basis.
The ECC also took the following decisions: (i) only those mills will be allowed to export who have cleared the outstanding dues of farmers for sugarcane crop upto 2017-18 as required under the Sugar Factories Control Act 1950 and notified by the respective Cane Commissioners;(ii) mills would start crushing at full capacity by 15th November 2018. In case export quota is granted prior to the said date, the exporter/ miller shall give an undertaking that it will commence crushing from the said date;(iii) exports will ship their consignments within 60 days of quota allocation by the SBP. In case of non-shipment within the said period, a non-performance penalty of 15% will be imposed on the respective miller; and (iv) sugar mills/ exporters who are defaulters of banks will not be allowed to export sugar.
The ECC directed FBR to submit a report on tax evasion being made by the sugar industry to the ECC in its next meeting.
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