ISLAMABAD: Finance Ministry has reportedly refused to allocate funds for procurement of 0.3 Million Metric Tons (MMT) of sugar from sugar mills as strategic reserves, citing financial constraints, but showed willingness to pay interest charges in the next budget, sources close to Minister for Industries and Production told Business Recorder.
The Minister, sources said, did not see the summary of sugar procurement from sugar mills due to conflict of interest.
On February 24, 2022, Ministry of Industries and Production (MoI&P) informed the Economic Coordination Committee (ECC) of the Cabinet that it proposed that up to 0.3 million metric tons of sugar (sufficient for two-month household consumption) should be purchased by the Federal Government, whereas the Provincial Governments of Punjab/ Sindh may be advised to purchase 0.2 million metric tons of sugar for strategic reserves from sugar mills in current bumper crop year, i.e., 0.1 million metric tons by each province.
The MoI&P further proposed that local purchase of sugar should be carried out when prices are lower in the local market (i.e., from February 2022 till June 2022). The purchase of sugar may be made in a phased manner so as not to interfere with market forces. Further, sugar should be purchased in following manner: (i) up to 0.150 million metric tons of (granular sugar used by domestic consumer as per PSQCA standards) to be purchased by PASSCO and up to 0.150 million metric tons to be purchased by TCP;(ii) sugar purchased from local sources by PASSCO and TCP will be kept in government-owned warehouses of these organizations;(iii) the purchased/ stored sugar will be released as per terms and conditions on the directions of ECC/ Cabinet; (iv) purchase of up to 0.3 million metric tons of sugar will be financed by Finance Division and purchase of sugar will be done through standard procedure of commodity financing; and (v) similar advisory may be issued to Punjab and Sindh by Ministry of Industries and Production.
During the discussion, Ministry of National Food security and Research argued that PASSCO did not have the required storage capacity, infrastructure or specialized training for handling this specific commodity, i.e., sugar; and was not in a position to procure and maintain storage of sugar.
The Ministry of Commerce stated that TCP does not have the required storage capacity. In case of procurement of sugar by the TCP, it has to hire appropriate storage from the private sector. In addition, logistic cost of the transportation and multiple handling (loading/ unloading) would significantly enhance the cost and that cost should also be included in the procurement budget.
The Finance Division stated that agriculture is a devolved subject; therefore, the provinces should bear the cost instead of the federal government. It added that required funds could not be provided, within this financial year, due to financial constraints.
The Finance Minister, Shaukat Tarin, stated that the credit limits from the banks could be obtained for procurement and the Finance Division should pay the cost of borrowing, i.e., interest charges, in the next budget.
The ECC further observed that there should be one organization procuring the sugar instead of two.
Finance Minister agreed and directed the TCP to handle the operation on behalf of the federal government. He emphasized developing processes for revolving the stored sugar so that old material could be replaced with the fresh one. It was suggested to develop a cycle for managing the strategic reserves of sugar and other commodities.
The sources said that after detailed discussion the ECC took the following decisions: (i) Federal government shall purchase 0.3 million metric tons of sugar through the TCP for which Finance Division shall provide required cash credit limits for procurement of sugar.
The cost of purchase and other incidentals will be paid to the TCP by the government;(ii) sugar purchased will be kept in appropriate warehouses owned by the government/ private sector by the TCP; (iii) modalities for disposal/r evolving of sugar shall be controlled and developed by the Ministry of Industries and Production; and (iv) MoI&P will issue advisory to the Governments of Sindh and Punjab to procure 0.1 MMT of sugar each for strategic reserves from their own resources to protect the citizens from artificial price hikes.
Copyright Business Recorder, 2022