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June 27, 2019

Sugar millers deplore govt threats, deny price hike


June 27, 2019

LAHORE: Pakistan Sugar Mills Association (PSMA) on Wednesday negated the government claims that the commodity’s prices were jacked up following the announcement of federal budget in mid-June, saying, conversely, there was a downtrend by almost Rs2-3/kilo in the market during the last couple of weeks.

The association, however, insisted the price of sugar will escalate further with the levy of enhanced sales tax in July.

The availability of sugar in the market is in abundance as it was in a glut-like-situation for the last many months. Prices are depressed due to record production of sugar in last couple of seasons.

There is no doubt the sugar millers are to deliver commodity according to the demand and delivery instructions of the buyers/dealers, said a senior member of PSMA’s ruling group here on Wednesday.

Talking about the proposed crackdown on sugar mills, the official said all the stakeholders were perturbed over the federal government’s rhetoric, which he said was aimed at maligning the industry for no valid reason.

There was a harrowing fall in the price of sugar due to a glut-like-situation in the country for the past several years and the industry is not in a position to recover its cost of production that is why a number of mills were sold, he said.

As a consequence, he observed, the crushing season 2018-19 also started late in December due to carryover stocks and in the absence of any mechanism to dispose of the surplus stocks.

He said the sugar industry remained engaged with the present government as it was not possible to buy sugarcane from the growers at the support of Rs180/40 kg at a time when sugar price was at Rs50-51/ kg.

The government having realised the gravity of situation and to mitigate the plight of the growers allowed export for the disposal of surplus sugar.

To facilitate this, the government of Punjab also allowed export subsidy of Rs5.35/kg on the cascading mechanism basis so that the price of sugar that had fallen below the breakeven level could get stabilised in the interest of the growers and with a view to ensuring their payments considering the international prices.

The senior PSMA member observed that sugar industry had time and again reiterated that its cost of production based on the support price of Rs180/40kg comes closer to 63/kg with the previously notified rate of sales tax. With the disposal of surplus through exports, the domestic sugar market stabilised and industry was able to pay up to Rs225-230/40 kg to the growers during the crushing season and the industry average was around 190-195/40kg and resultantly the average breakeven with other cost push factors and interest/financial costs has considerably increased for this season. Chief Minister of Punjab has also acknowledged the fact that almost all payments to sugarcane growers have been made for the current crushing season, which became possible only because of the stability in the sugar price, he claimed.

He cautioned that with the increase in sales tax rate, price of sugar will escalate further in the days to come. However, ever since the budget 2019/20 has been announced, there is a downward trend in the market by almost two/three rupees per kg as the dealers have started taking delivery of the sold-un-lifted stocks and the availability in the market is in abundance.

The PSMA official explained that sugar was produced in 100-120 days of crushing season and sold throughout the year therefore at any given point of time, there will always be some sold/unsold quantity in the stores. Therefore, he maintained, assuming that the sugar mills were hoarding stocks was contrary to facts. The industry is and remains tax compliant in general and all assumptions against us are based on hearsay, he concluded.

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