The Pakistan Sugar Mills Association (PSMA) has held the government responsible for current sugar sector crisis which failed to implement notified sugarcane price of Rs 100/40kg, official sources told Business Recorder. According to the Association, the sugarcane growers stopped supplies to mills, thereby implying that the industry was forced to pay the international sugar price of $850 (C & F Karachi). These prices have now crashed to $500 (C & F Karachi).
PSMA has also written a letter to the Minister for Food and Agriculture, Nazar Muhammad Gondal, urging timely steps to deal with the current sugar sector financial crisis which, it is feared, may lead to the worst ever sugar crisis by next season if correctives measures are not taken by the government. The arguments given by the association to resolve this situation are as follows: (i) instead of notified sugarcane price of Punjab, Sindh and Khyber-Pakhtoonkhwa of Rs 100/40kg, Rs 103/40kg and Rs 100/40kg respectively for the crushing season 2009-2010, the average price in Punjab was Rs 200 per 40 kg at 8.6 percent recovery, Sindh Rs 232.50 for 9.3 percent recovery and Khyber Pakhtoonkhwa Rs 185 for 7.91 recovery.
PSMA in its letter further stated that beside the cost of sugarcane, salaries, bank interest, factory overheads, manufacturing expenses along with the sales tax and excise duty of Rs 3/kg put together renders the breakeven price of sugar at Rs 68.13, Rs 72.50 and Rs 68.47 in Punjab, Sindh and Khyber-Pakhtoonkhwa respectively.
"We have proposed 35 percent regulatory duty on the commercial/industrial imports as there would be no reduction in the price of cold drinks, juices, confectioneries, candies and sweetmeat to the domestic consumers. However, the Trading Corporation of Pakistan (TCP), that provides sugar to the poor masses through utility stores, should be exempt from the levy of 35 percent regulatory duty," said Iskandar Khan, Chairman of PSMA, while taking to Business Recorder.
He said that due to high cost of sugarcane, the mills exhausted their sanctioned working capital limits; the sugar sold during the crushing campaign was utilised towards sugarcane payments. Despite this, out of approximately Rs 170 billion being the cost of sugarcane, around Rs 30-40 billion are still outstanding towards farmers along-with Rs 80-100 billion of working capital utilised towards growers' payment.
"In case, GoP had ensured implementation of the support price of sugarcane based on our various appeals in the media we could have competed with the plunging global sugar prices," he added. PSMA is of the view that to save the sugarcane farmers and to ensure repayments of working capital loans to banks, the government must impose 35 percent regulatory duty on the commercial and industrial imports of sugar.