The federal government is likely to deregulate sugarcane prices from next year after approval of the cabinet and due consultation with the provinces, well informed sources told Business Recorder. The issue was discussed by the Economic Co-ordination Committee (ECC) of the Cabinet in its "very special" meeting on December 7, 2015 on the proposal of Commerce Ministry tailored by an inter-ministerial committee constituted by the Prime Minister Nawaz Sharif.
Official documents reveal that the committee in first its meeting on November 30, 2015 opined that in view of the stock position and production forecast, a total of 250,000 tons may be allowed for export with a cash subsidy of Rs 10 per kg as in last year. During the second meeting of the committee, the representatives of Pakistan Sugar Mills Association (PSMA) were invited to present their viewpoint. They highlighted that there was a disparity in sugarcane price announced by provincial governments as Punjab and KP announced Rs 180/40 kg while Sindh notified Rs 172/40 kg in 2014-15, of which Sindh government paid Rs 12/40 kg and mills paid Rs 160/40 kg to growers. Further, the sugarcane price fixed by provincial governments was higher than the price worked out by Agriculture Policy Institute. Hence, the increase in support price led to higher sugarcane produce and higher cost of production.
The ECC, discussed the proposal titled "provision of cash support for export of sugar" prepared by the inter-ministerial committee headed by Commerce Minister, Engineer Khurram Dastgir Khan and allowed export of 0.5 million tons of sugar in a phased manner, ie, 200,000 tons by 31st December, 2015, 350,000 tons by 31st January, 2016 and (cumulative) and remaining quantity (150,000 tons) by 31st March, 2016 (500,000 tons cumulative) provided that the export of sugar shall be subject to the following conditions: (a) the committee constituted by the Prime Minister would meet in first week of every month to review the sugar stock/export situation; and bring up to ECC any abnormal variation of the stock/export position and the domestic price of sugar;(b) only those mills would be allowed to export which have cleared the outstanding dues of the farmers up to last season and have started crushing on full scale; (c) cash support for incidental and freight @ Rs 13 per kg for export of sugar.
This cash support for incidental and freight will be shared equally by the federal government and the respective provincial governments ; (d) minimum price for export of sugar to Afghanistan and Central Asia at $450 per MT and ;(e) the cash support shall be disbursed through SBP as per the system in vogue. Sugar industry questions how 200,000 tons sugar can be imported in December 2015 when no system is in place so far.
Regarding the proposal "price of sugarcane may be deregulated from the next season so that government involvement and provision of subsidy is eliminated as the whole issue arises due to fixation of sugarcane price and difference in prices of sugarcane by the provincial governments" the ECC directed the Ministry of Industries and Production to place the case before the Cabinet after due consultations with the provinces. The ECC further directed that while submitting case to the Federal Cabinet, the MoI&P should also propose appropriate percentage of the subsidy amount to be committed for research and development.
The ECC also directed that the unutilised quota for export of sugar allowed earlier by the FCC shall stand cancelled. The ECC rejected a proposal of the MoI&P in which the latter had proposed that: (i) keeping in view the estimated average consumption of 0.4 million tons per month for November and December 2015, further exports may not be allowed or these may be kept limited to the balance remaining from 0.5 million tons allowed in December 2014; and (ii) any surplus inventory may be brought by the USC at the export price provided that government provides a subsidy to USC to cover the cost differential, if any, and to solve the financial problems of sugar industry and keep the domestic sugar price stable and benefit the general public.