Pakistan Sugar Mills Association (PSMA) has shared its woes with the Economic Officer of US Consulate who reportedly expressed his surprise over the government decision for not allowing export of sugar. Chairman PSMA Javed Kayani gave a detailed briefing to Robert Hawkins, on the potential of the sugar industry and export.
Chairman PSMA expressed concern over the prolonged indecision on the recently floated tender, as payments to banks and growers are still payable. He further explained that sugar industry is confronted with the dilemma of surplus stocks and still having a carryover from the last year crop cycle. During the previous crushing season the cost of sugarcane was about 200 per 40kg and there are financial costs added to the cost of production in addition therefore disposal of these stocks is imperative for the industry to wriggle out of present financial crisis.
He said there are two ways of disposal of surplus stocks: Government through Trading Corporation of Pakistan (TCP) can buy to build strategic reserves to offload in the open market in the event of any price spiral to protect the consumers else the industry can also get an outlet to sell through export window which is closed at present.
Robert Hawkins was surprised about the existing restriction on export about which the chairman informed that decision to curb exports took place in shortage years saying he had suggested to the policymakers to revisit their policy and consider allowing export of 500,000 tons of sugar which can actually fetch $300 million dollars to partially support the forthcoming payment to the IMF and reduce pressure on rupee-dollar parity as we are having sufficient stocks at present and hopefully there will be no shortage even after export.
However, as a first priority the government should avail of this opportunity to continuously buy sugar from the industry to save on foreign exchange. Chairman PSMA said that approximately an amount of Rs 250 billion will have to be paid to growers during this season, therefore, ensuring the disposal of surplus stocks is the prime responsibility of the government as we operate in a highly regulated environment where we can not buy according to the market price of sugar by doing a backward calculation nor we can close the mills without first crushing the entire sugarcane crop available in the respective vicinity of the sugar mills, therefore sugar industry only acts as a processor to convert the entire sugarcane crop in the shape of sugar therefore industry is justified to ask for measures necessary for the disposal of surplus sugar which is not produced by choice.
Javed Kayani made it categorically clear that without disposal of stocks there is no way the industry can clear dues to the growers who are already hard pressed therefore pragmatic decision making is necessary. He gave forecast of production for the current crushing season with a likely production of about 4.8 million tons by crushing approx. 54 million tons of sugarcane. The sugar industry will be having an over all surplus of more than one million tons after meeting with the domestic requirement of 4.2 million tons which leaves 600,000 tons more than the requirement of the country besides last year carry over of similar quantity.
Javed Kayani said buying of sugar is an issue relating to governance it is not merely a matter relating to industry alone therefore policy makers should follow holistic approach to support the millions of poor farmers of this country. He said if price of sugar continues to fall unabated the component of sugarcane will not be retrieved leading to very serious repercussions.