Pakistan Sugar Mills Association (PSMA) on Tuesday urged the State Bank of Pakistan to withdraw its loan repayment deadline besides disbursing fresh advances for timely commencement of crushing season without linking it to the adjustment of finances and cleanup period of one month.
"The major sugar producing units are in default because they are not allowed to dispose of sugar stocks to pay 25 percent each month to the banks as per the SBP directions. The delay in the disposal of sugar stocks due to the interference of the government has resulted in late adjustment of working capital finances and huge build-up of mark-up. Furthermore, the cap on sale prices has also upset the current ratios and hit the liquidity position of sugar mills."
This was the text of the letter written by PSMA Chairman Iskandar M Khan to SBP Governor Syed Salim Raza on October 28, 2009. In the letter, under the heading "Suggestion for the timely commencement of crushing season 2009-10," the PSMA chairman has requested the SBP governor to withdraw all the circulars, issued to sugar mill owners for the retirement of loans and advances.
He also requested for fresh disbursement of loans/advances without linking it with the adjustment of finances and to cleanup the period of one month. Iskandar Khan said it is for the first time that the provincial governments in Punjab, Sindh and NWFP have not allowed sugar mill owners to sell the commodity.
The local district food controllers along with the DCOs have sealed the godowns, which resulted in suspension of supply to dealers and onward sale to retailers despite availability of huge stocks, he added. He said Lahore High Court (LHC) taking notice on media reports had initiated suo motu proceedings and without consulting the sugar mill owners, the honourable court had fixed Rs 36/kg ex-mill price of the commodity and Rs 40/kg in retail, with the result the Punjab government took over the sugar stocks held with the mills.
He said Peshawar High Court (PHC) had also taken suo motu action on August 20, 2009 and directed the DCOs of each district to impose complete ban on the inter-district movement of sugar and regulated the sugar sale through a permit system. He said practically the sale and control of the commodity is in the hands of director food of the provincial governments and sugar mills are only managing the cash receipts.
He said the industry is suffering huge losses as ongoing sugar sale at ex-factory rate of Rs 36 per kilogramme (Rs 32.25 + Rs 2.75 sales tax and excise duty) is below the cost of production. Following forced interference of the government, the controlled quantity of sugar lifted from the processing units at Rs 36/kg was later sold in the markets at the rates ranging from Rs 55/kg to Rs 80/kg by the officials posted at the sugar mills, he added.