Sugar sector may be deregulated with no indicative cane price

LAHORE: The government is contemplating abolishing the indicative sugarcane price after taking a decision in principle about deregulating the sugar sector, it was learnt here on Tuesday.

Sources claimed that there would be no indicative sugarcane price for the crushing season starting by November, according to a policy guideline prepared by the top bureaucracy of Punjab. The federal government is also said to be on course to relax curbs on sugar import and export while the Punjab government is poised to get rid of indicative pricing for buying sugarcane from farmers at certain fixed rates.

Commenting on the development, Zaka Ashraf, zonal chairman of Pakistan Sugar Mills Association (PSMA), stated that deregulation would be better for the industry and growers. This act would be good for the economy if it is enforced at the federal government level.

When the attention of a veteran sugar miller was drawn towards sugarcane indicative price for the 2024-25 season, he said there would be no such thing for the next crushing season.

To a question, he said he was not sure whether the International Monetary Fund (IMF) had any role in liberalizing the sugar sector in the country.

Majid Abdullah, a flour miller, said there should be no role of the government in commodities’ trade. Giving the example of abolishing wheat support price by the provincial government, he said it was a step in the right direction. Market forces should determine commodity prices based on the supply and demand mechanism.

Such policy bore fruit for consumer, he said, adding that against the government-fixed price of Rs1,730 per flour bag, today Atta (wheat flour) was being sold at Rs1,600 per bag by mills owing to low wheat rates. He said stiff competition in the market led to crashing of flour price.

Khalid Khokhar, president of Pakistan Kissan Ittehad (PKI), however, was visibly disturbed over the likelihood of removing the indicative pricing mechanism for sugarcane, saying that this development would grievously hurt the growers. The Punjab government is in no mood of fixing the sugarcane indicative price for the upcoming season, he said and added sugar mills had been allowed to influence decisions that directly affected the farming community.

When contacted, Bilal Yasin, Punjab food minister, did not comment on withdrawal of indicative pricing for sugarcane.

According to an official assessment for 2023-24 sugar year, the cost of production is an important factor in evolving suggestions for the indicative price of sugarcane. The cost of production for 2023-24 has been increased by 12 per cent in Punjab, 14.6 per cent in Sindh and 12 per cent in Khyber Pakhtunkhwa. Main reasons for the rise in cost of cultivation in all provinces are, among others, increase in land rent, high prices of seed, stripping, binding, loading operations, etc.

Exports hindrances

Meanwhile, Pakistan Sugar Mills Association (Punjab Zone) has denied the impression that sugar mills have not fulfilled the quota of 0.15 million tonnes of commodity’s export.

The PSMA-PZ spokesman said that the Pak-Afghan border has been closed for the past several days and bilateral trade has come to a complete standstill. Currently, about 6,000 tonnes of containers carrying sugar are standing on the border, which are stopped due to the suspension of trade between the two countries.

How will the sugar industry achieve the target of 45 days of export when the HS Code of sugar has not been activated in the Customs Department’s software for 15 days. The government is requested to immediately resolve the issue of closure of the Pak-Afghan border so that the surplus sugar can be transported easily.

The spokesman said that only two months are left in the start of the next crushing season and with 1.5 million tonnes of surplus sugar, the government has not made any significant progress in this regard. Due to good sugarcane crop, further 1.5 million tonnes of surplus sugar is expected in next season. Sugar mills cannot afford to start a new crushing season until the current surplus stock of sugar is exported, he stressed.