Millers refuse to export additional sugar without govt rebate

LAHORE: Pakistan Sugar Mills Association (PSMA) has demanded the Ministry of Commerce for rebate of Rs15/kg on the export of additional 600,000 tons sugar, as the international price has dropped to $400/ton from $540/ton.

The Sugar Advisory Board (SAB) had recommended the Ministry of Commerce to allow exporting 1.2 million metric ton surplus sugar without any time restriction, as the total surplus sugar till season closing would be 1.884 million tons. However, the ministry followed half the recommendation, and permitted export of 600,000 tons of sugar.

The sugar industry sought the permission when the international price was on the higher side to pay the sugarcane growers’ dues. However, the government delayed the decision. In the meantime, the international sugar price dropped to $400 metric ton which makes local sugar unviable for export.

The sugar industry has asked the government to pay Rs15/kg export rebate to the industry in order to ensure exports of the allowed surplus sugar. Without export rebate it would not be possible to export the sugar, the industry claimed.

Delayed economic policy related decisions have already been adversely affecting the economy, and trade deficit has reached historic levels.

According to the documents, the total sugar production of the country stood at 7.043 million tons while last year’s carryover stock was 0.966 million tons. The total availability of sugar in the country was 8.039 million metric tons, out of which 4.318 million tons was in Punjab, 2.234 million tons in Sindh, and 0.491 million tons was stocked in Khyber Pakhtunkhwa.

Total consumption of sugar in the country is 5.1 million metric tons, with average monthly consumption of 0.425 million metric tons. Country maintained 45 days strategic reserves of 0.630 million metric tons.  Currently, sugar mills owe almost Rs25 billion to sugarcane growers in dues, which the millers are unable to pay due to the financial crunch faced by industry.

The domestic sugar market is already in selling pressure, while no unprecedented hike in sugar price was recorded during Ramazan, when sugar consumption is high.

According to PSMA report to SAB, unprecedented sugar production of 7.054 million tons during 2016-17 crushing season was the result of government announced export subsidy of Rs13/kg last year.

This not only helped farmers to get their dues in time from mills, but also earned foreign exchange for the country. Hence, more sugarcane was grown and crushed in the 2016-17 season.

However, inconsistent government policy has created uncertainty for the sugar industry, which was unable to export surplus sugar in the international market.

First, the decision was delayed and later half the quantity was allowed for export, said an official of the PSMA. He said the industry has not demanded something which is unjustified.

“Rather, we sought help of the government to stabile the industry and make it an exporting industry,” he said, and added that the government did not focus on exports which resulted in trade balance fiasco.

“The government can create a win-win situation,” he said. Instead of giving rebate on all 600,000 tons, it could offer it on lesser quantity of some 200,000 tons. Meanwhile the government should monitor international price. Once it increases, the government should withdraw export rebate on sugar. This way the industry would be able to export surplus sugar, while the dues of growers would also be cleared.

An official of the Ministry of Commerce said the government has previously allowed 425,000 tons sugar exports without any rebate on first come fist serve basis. The industry demanded export rebate at that time too. However, allowed export quota of 425,000 tons has never run out since December 26, 2016 when it was approved.