The Pakistan Sugar Mills Association (PSMA), Sindh zone, has proposed that the export of surplus sugar be allowed and sugar, being a food item, be exempted from sales tax as all other commodities are also not subjected to the sales tax levy.
PSMA Sindh zone Chairman Shunaid Qureshi, forwarding the proposals for 2004-05 budget to Finance Minister Shaukat Aziz, has emphasised that an important point for the survival of sugar sub-sector is to create firm linkage between cost and sales price of sugar, either by deductive or inductive method.
He said the national sugar industry was passing through an exceptionally difficult situation for the past four years, arising from 632,645 tonnes refined sugar imports in 2000-01.
This over-supply was followed by sugar production of 3.249 million tonnes in 2001-02, giving a surplus of 637,149 tonnes, he said.
Qureshi said sugar production of 3.662 million tonnes in 2002-03 and a record production of four million plus tonnes for the 2003-04 season created a fabulous surplus of more than a million tonnes after providing 3.40 million tonnes sugar for domestic consumption.
This resulted in fall in sugar prices by Rs 3,743 per tonne in 2001-02, by an additional Rs 2,117 per tonne in 2002-03 and further by Rs 2,079 per tonne in 2003-04, he said, adding the sugar prices had trailed behind cost of sugar production and consequently huge losses had been suffered by sugar industry, eroding its equity in several cases.
An unusual aspect of the national sugar industry was contrasting trends in Sindh and the Punjab in the recent past, he said, and added this contrasting trend was attributable to a skewed sugar policy.
Qureshi gave the following key reasons:
-- Disparity of sugarcane support price, quality premium is being prescribed in Sindh and it is not being notified in the Punjab, and sugar sales price in Sindh tends to be Rs 1000 to Rs 1,250 per tonne lower than in Punjab, due to Sindh being always a sugar surplus zone to the extent of 400,000/700,000 tonnes of its production per season.
-- Pakistan has a potential to double its sugar production. Presently the installed capacity can process 75 million tonnes of sugarcane. At 8.7 percent average recovery, it can produce 6.5 million tonnes of sugar.
-- National sugarcane yield of about 48 tonnes per hectare can be doubled by evolving a supportive system. Similarly, average national sugar recovery at 8.7 percent can be improved to 10 to 12 percent with care.
-- Supervised cultivation, integrated pursuits by sugarcane farmers and sugar industry, leading to research and varietal development, can achieve the given potentials.
-- The government of Pakistan has conveyed to World Trade Organisation (WTO) "Bounded Duty" on sugar and allied products at 150 percent. This shall be made operative.
-- Sugar imports in the event of shortage be limited to properly assessed volume and at the specified "Bounded Duty."
-- Strategic sugar stocks, as part of food security system at the national level be introduced so as to break cycle of shortage and prevent import situation.
The PSMA budget proposals also covered the following points:
-- Deferment of sales tax for four/five months of production, sales tax audit, sales tax, income tax and system of set aside.
-- Aggrieved taxpayer on higher assessment by income tax officer (ITO) opts for remedy of appeal. Often the assessment is set aside and reverted to the same ITO for review. Likewise, on being dissatisfied by the decision in appeal, the assessee prefers to approach the tribunal. In such cases also, the set aside method and review decision is often taken.
This system unduly extends decision-making and resulting repetition prolongs finalisation.
This system may be shortened and instead of set aside, decision by higher authority be taken to avoid prolongation and its consequent hassle to taxpayers.