The State Bank of Pakistan (SBP) has said that sugar exports to all destinations including Afghanistan and Central Asian Republics will be subject to receipt of export proceeds by wire transfer through banking channels.
As the Economic Co-ordination Committee (ECC) of the Cabinet has allowed sugar mills to export 500,000 metric tons of sugar with a freight support, the SBP has issued a mechanism for submission of applications for allocation of quota.
Authorized Dealers (ADs) have been asked to forward the requests of sugar mills to the Director, Foreign Exchange Operations Department (FEOD) SBP-Banking Services Corporation (BSC) for approval along with the attested/ authenticated copies of Sugar export contracts, Manual Form-E and Irrevocable L/C or advance payment vouchers.
In addition, Clearance Certificate issued by the concerned Cane Commissioner is also mandatory to the effect that concerned sugar mill has cleared outstanding dues of farmers up to the last season. Further, after November 30, 2017 the said clearance certificate will also state that concerned sugar mill has started crushing at full capacity.
FEOD will allocate sugar export quota to sugar mills on first-come-first-served basis and ADs will ensure receipt of a minimum 15 percent of total contract value as advance payment by obtaining an irrevocable L/C from the buyer.
As per mechanism, all exports including those destined for Afghanistan and Central Asian Republics will also be subject to receipt of export proceeds by wire transfer through banking channel.
Exporters will be required to ship the sugar within 60 days from the date of approval regarding quota allocation. In case of non-performance within the stipulated time against the quota allocated by FEOD, ADs will recover a penalty of 15 percent of total contract value from the exporter and deposit the same with SBP-BSC, Head Office. In case of partial shipment, the penalty will be recovered by the AD proportionately.
ADs will submit sugar export shipment update to the SBP on a weekly basis as per the described reporting format.
Similarly, as per procedure for submission of freight support claims, SBP said that it will disburse freight support to sugar exporters at variable rates to be calculated on daily basis as per the formula decided by ministry of commerce based on white sugar price index published by International Sugar Organization.
Further, the international sugar price on the date of sugar export quota allocation will be applicable for calculation of rate of freight support irrespective of the export price. Moreover, freight support payment will be subject to budget allocation by the Federal Government and the respective provincial governments. In case a province decides not to contribute its share of freight support, only 50 percent of freight support, being federal share will be paid to the claimant.
Accordingly, SBP has advised ADs to process the cases of eligible sugar mills for cash freight support against the export of sugar as per mechanism and they will forward the shipment-wise requests of sugar mills on prescribed format through their respective Departmental to the Director, FEOD, SBP-BSC.
Export Proceeds Realization Certificate/Advance Payment Voucher properly showing utilization will also be required for freight support. Freight support will be allowed only after full realization of export proceeds against E-Form.
Sugar mills will approach the respective office through their AD claiming the freight support within 60 days of realization of export proceeds or date of shipment, whichever comes later. No claims will be entertained after aforementioned time period.
The SBP-BSC will return discrepant claim to respective AD and the same must be resubmitted after removing the discrepancies within 30 days of return, after which no such application will be entertained.
Approved claim will be disbursed to respective AD in its account maintained with SBP-BSC for onward credit to the exporter's account within 24 hours of disbursement.
SBP has mentioned that the provision of freight support will not be available for already utilized sugar export quotas from the SBP allowed vide ECC's decision dated July 18, 2017. The rest of the unutilized quantity (including quota issued but not executed) out of 300,000 metric tons will be considered withdrawn.