The government is facing catch 20 situation with respect to sugar as neither growers are getting the announced sugarcane price of Rs 180 per maund nor are the mills exporting the required quantity due to stringent conditions, well informed sources told Business Recorder. Prime Minister Shahid Khaqan Abbasi and Chief Minister Punjab Mian Shahbaz Sharif are concerned about the current sugar industry situation which emerged due to glut of commodity in international market and higher cost of production in Pakistan.
A couple of days ago, Secretary Commerce Younus Dagha at a meeting of Senate Standing Committee on Commerce and Textile stated that the government should review crop pattern so that sugar and wheat may be produced to meet domestic consumption only as both commodities are exported with subsidy. He further maintained that cotton growing areas are shrinking shrunk due to these two crops, and he proposed that some areas should be earmarked for pulses and other farm products. Presently Pakistan is importing different farm commodities of $ 6 billion per annum.
Commerce Ministry maintained that an ideal scenario of fixing the support price is one in which market price is higher than support price. When a new crop enters the market, it will be sold at market price and a situation may arise when on fulfillment of needs of industry and consumers, a surplus is left with farmers.
Commerce Ministry further argued that the government is losing at both ends. Ultimately, it is the sugar millers who are better-off; the farmers are still better-off relative to domestic consumers who are worse-off. The perverse incentive to grow more sugarcane has resulted in a sharp decline of cotton acreage particularly in Punjab, with negative implications for the whole country.
The sources said, almost 70% of sugar mills are located in the core cotton zone of the country, especially in Punjab. The presence of mills in major cotton growing areas and their increasing crushing capacity have caused a 26 percent decline in cotton sowing areas, especially in south Punjab including Rahim Yar Khan and Muzaffargarh.
The sources quoted former Commerce Minister Engineer Khurram Dastgir as saying that sugarcane plantation in these areas implies that cotton sowing has declined. He expressed concern that the trend may eventually bring down exports of cotton products in the country.
During a recent ECC meeting in June last year he had insisted that a study be undertaken to secure a balance between sowing of the two key crops and to ensure that one crop was not cultivated at the cost of the other. Sugarcane cultivation has risen by 27 percent so far in Punjab. Cotton cultivation areas have been squeezed by the popularity of maize and potato crops in Sahiwal, Faisalabad and Khanewal districts.
According to sources, on December 22, 2017, the ECC, while approving export of additional quantity of 0.3 million tons of sugar, approved strict conditions for millers.
Secretary Privatisation Division proposed that instead of 60 per cent payment as proposed by the Commerce Division, 40 per cent payment may be made to the mills at the time of procurement. Similarly, instead of 20 per cent, 40 per cent additional payment may be made to them subject to confirmation by respective Provincial Cane Commissioner that the dues of sugarcane growers have been cleared.
The sources said, Pakistan Sugar Mills Association (PSMA) expressed surprise on the decision and approached the federal government for review of its decision. The Association also held negotiations with the provincial governments regarding ensuring the payment of Rs 180 per maund. However, the issue remains unresolved.