LAHORE: The new sugar price, fixed by the Ministry of Industries and Production (MoIP) after consultation with the Pakistan Sugar Mills Association (PSMA) on the Lahore High Court (LHC) instructions, was not accepted by the industry.
The industry claimed that the price of sugar fixed by the MoIP was in complete defiance of the restraining orders of the Peshawar High Court (PHC), and in violation of the criteria, set by the LHC in its July 23, 2021 order.
Contrary to the PSMA claims, the order issued by the MoIP on July 30, 2021 stated that the meeting with the sugar industry was held on July 27, 2021 in compliance with the court orders issued on July 23, 2021. The cost structure of mills was reviewed in the presence of the sugar industry/ PSMA and its viewpoint was heard at length. The data provided by 32 sugar mills was examined, and the average of the cost formula was shared with the PSMA members.
“At the outset, the Punjab sugar mills asked for employing the costing model, used by the Punjab government for price fixation notification dated April 7, 2021, and to use the same numbers contained in the said working, except for the sale rate of molasses and overhead charges,” the order stated. The data, documents and arguments put forth, however, showed that if the contention of sugar mills was accepted, the ex-mill price of sugar works out to be Rs105.76 per kg, which is flawed. “As even on 27th of July 2021, the ex-mill price ranged between Rs97 per kg to Rs98 per kg.” Thus, the suggested price, being higher than the current market price, is not tenable, the order added.
The cost element in this work has been shown at Rs77.52/kg, whereas the self-declared data provided by 32 mills for six-month period shows an average ex-mill price of Rs72.16 per kg. Even ordinary business prudence demands that no business can sell its product at less than the cost of the product for such a long period of time, in which more than half of production is sold.
Moreover, the federal government played an advisory role in the earlier exercise, and the Punjab government was at liberty to adopt either of the two formulations, worked out by the federal government.
Data obtained in response to the said notice showed that earlier working did not include cost recovery through sale of bagasse and mud. The recovery of bagasse, sale price of bagasse, recovery of sugar mud and sale price of sugar mud was obtained from the data of 32 sugar mills, which is 4.05%, Rs3.8/kg, 3% and Rs0.843/kg, respectively, the order said.
Further, the MoIP received information from cane commissioners on recovery rate of sugar based on primary evidence that showed recovery rate of 10.4% for Punjab (laboratory report), which was shared with the sugar industry. The sugar industry contended that the laboratory reports are not accurate as some of the sugar content goes into mud and bagasse. Thus it is lower than the laboratory report. The sugar industry asserted that the sugar recovery rate is 9.3%.
Similarly, the purchase price of sugarcane for the season as reported by the cane commissioner Punjab shows an average purchase price of Rs259/40kg, based on evidence gathered from banking records of the mills. The sugar industry contended that the cane price is Rs265/40 kg. However, the industry could not refute the bank record as shown by the cane commissioner Punjab.