Sugar industry is reportedly perturbed over the speculations of a crackdown being launched by the Federal Board of Revenue (FBR) soon after the passage of the federal budget.
Talking to Business Recorder, one of the sugar industry players said there was a harrowing fall in the price of sugar due to a glut-like situation in the country during the past several years and the industry was not in a position to recover its cost of production that is why a number of mills were sold. As a consequence, the crushing season 2018-19 also started late in December due to carryover stocks and in the absence of any mechanism to dispose of the surplus stocks of sugar.
He said the industry remained engaged with the government as it was not possible to buy sugarcane from the growers at the support of Rs 180/40 kg at that time when sugar price was at a level of Rs 50/51 per kg.
The government having realised the gravity of situation and to mitigate the plight of the growers allowed export for the disposal of surplus sugar from the country and to facilitate this approval, province of Punjab also allowed export subsidy of Rs 5.35 per kg on the cascading mechanism basis so that price of sugar which had fallen below the break-even level could get stabilised in the interest of the growers and their payments in view of the international sugar prices.
Replying to a question, he said sugar industry has time and again reiterated that its cost of production based on the support price of Rs 180/40kg comes closer to 63/kg with the previously notified rate of sales tax. With the disposal of surplus, the domestic sugar market stabilised and industry was able to pay up to Rs 225-230/40 kg to the growers during the crushing season and the industry average was around 190-195/40kg and resultantly the average break-even with other cost push factors and interest/financial costs has considerably increased for this season. The Chief Minister of Punjab has also acknowledged the fact that almost all payments to sugarcane growers have been made for the current crushing season which was became only possible because of the stability in sugar price.
With the increase in sales tax rate, price will escalate further. However, ever since the budget has been announced on June 11, 2019 there is a downward trend in the market by almost two/three rupees per kg as the dealers have started taking delivery of the sold unlifted stocks and the availability in the market is in abundance. Sugar millers are obliged to deliver according to the demand and delivery instructions of the buyers/dealers, he added.
Answering another question, he said sugar is produced in 100-120 days crushing season and sold throughout the year therefore at any given point of time there will be stock in the godowns of sold/unsold quantity. Therefore, assuming that the sugar mills are hoarding stocks is a sheer fallacy. The industry is and remains tax compliant and in general all assumptions against the industry are based on hearsay, he said.
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