On March 18, the Federal Board of Revenue (FBR) issued a notification aimed at bringing changes in the sales tax regime for imported sugar.
Through a statutory regulatory order, the FBR abolished the minimum import price of $725 per ton of sugar for the purpose of calculating 17 percent sales tax.
Now, the 17 percent GST will be worked out on the basis of cost, insurance and freight (CIF) value of imported sugar, plus the applicable customs duty.
This will increase the sales tax on every kilogramme of sugar as compared to the old fixed $725 per ton.
Talking to Business Recorder, Senior Vice Chairman PSMA, Javed Kayani said that the issuance of SRO 233(1)/2020 was tantamount to back-stabbing the sugarcane growers of the country.
He termed it a unilateral decision of the government without taking into account the growers payable position, and the procurement cost of sugarcane during the current crushing season.
In reply to a question, Kayani said that sugarcane crop was short, consequently price spiraled, and mills continued crushing even at 325/40 kg, as a result the average cost of procurement of sugarcane is between 240-250/40kg.
Therefore, if the mills are unable to sell sugar at less than 85/kg ex-mill, there will be a serious chaos of making the remaining 20-25 percent payments to growers, which are still outstanding and contingent with sale of sugar.
On the one hand, the government wants the industry to clear the growers' dues instantly, and on the other hand, it was allowing duty-free import without any taxes and duties, which will only jeopardise the interests of millions of growers, who eke out existence by cultivating sugarcane.
He was of the view that the government must rationalise the tariff to safeguard and protect growers' payments.
He also held the Office of the Cane Commissioner responsible for not ensuring supply of sugarcane to mills at an announced price of 190/40kg, if the government wanted to keep the price at a level of 70-75/kg.
He said mills had to close due to sudden increase in price of sugarcane when growers withheld sugarcane crop during December and January but at that time the Punjab government initiated ferocious actions by lodging FIRs against the mills to restart crushing, when there was no availability of sugarcane.
This forced measure to restart the mills, when the supply was limited and scant resulted in phenomenal increase in the price of sugarcane, which is adversely impacting the cost of production.
He further stated that the sugar industry appreciates government's concern about the availability of sugar at a reasonable level, it could however be achieved by allowing import of raw sugar before the beginning of the crushing season 2019-2020.
"A timely decision by the government could have served two basic purposes: there would have been no shortage of sugar in the country, and rate of sugarcane would have remained between 190-200/40kg," he said, adding that the industry would have exported the equivalent value of the raw sugar in a year of surplus or the remaining after meeting the domestic requirement. India allows a period of 36 months to re-export the equivalent quantity to offset the foreign exchange.
The sugar industry has urged decision makers to reconsider their decision, as the SRO233 (1)/2020 of March 18, 2020 will have serious repercussions.
The outstanding remaining payments of the growers can lead to a law and order situation, which will be another embarrassment for the government.

Copyright Business Recorder, 2020