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April 6, 2020

Exports made payment to sugarcane growers possible: sugar mills body

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April 6, 2020

KARACHI: Chairman Pakistan Sugar Mills Association (PSMA) Aslam Faruque has said the sugar mills are being operated under the Cane Act, the provincial governments decide cane prices and do not care for the cost of sugar and the end price, while the federal government only imposes sales tax.

While talking to Shahzad Iqbal in the Geo News programme ‘Naya Pakistan’, the PSMA chairman claimed the association always suggested the government to decrease the cane prices to control sugar prices but the provincial governments asserted that it was not their prerogative but the federal government was responsible for the cost of sugar. He said in such a situation, the sugar mills owners had no option when the government asked the mills to produce excessive sugar.

Aslam Faruque said power and textile sectors were subsidised but the sugar mills would never be treated accordingly and given only Rs3 billion subsidy, while the sugar industry paid Rs300 billion annually for the payment of cane.

He said the cane prices were decided by the political governments and if politicians would have had any influence, then the cane prices would be much lower. The chairman said the Punjab government had decided the cost of production of sugar was Rs63.72 when the cane price was Rs180 per ton, while the sugar price was Rs55, adding that the Punjab government had decided sugar prices at Rs70 per kg. He said in January 2017, the retail price of sugar was Rs64.80 but after the bumper crops of cane, the prices decreased as much as Rs50 per kg.

Aslam Faruque said the sugar mills had excessive sugar of more than two million tons and asked the government to export but were not allowed that unnecessarily delayed in payment to cane growers.

He said the Punjab had written a letter to the federal government on April 15, 2019, requesting to ban sugar export, while in a sugar advisory board meeting, the mills owners were told that only 22 paisas was increased in sugar prices during the period of January 2017 to April 2019, adding that in January 2017 the sugar prices declined from Rs64 to Rs50 but soon recovered.

The chairman said if the prices would have not recovered soon, then the sugar mills would have been bankrupted. He said the cost of production has increased during the past years, while the US dollar prices also increased and the government had wisely decided to export sugar in October 2018, though one of the sugar advisory board members had expressed his concerns over sugar export but after being briefed by the mills owners, the advisory board had shown satisfaction over the decision.

Aslam Faruque said the government reviewed all the data, then decided to announce subsidy to the sugar industry but after the 18th Amendment, the federal government said it had no money to give any more subsidy to industries. He said the-then finance minister Asad Umar said the federal government would not give any subsidy but would ask the provincial government to give subsidy as it decided the cane prices.

The chairman said if the mill produced 15 per cent sugar, then it would export 10 per cent of its sugar and the mills in Sindh had an advantage in exporting sugar. He said the association had direct contacts with the DG FIA, adding that secretary food security had nothing to do with how much sugar was needed for export or how much was in carryover or how much canes were needed for sugar production, or how many sugar mills were shut down and how many got bankrupt.

Separately, while welcoming the release of the inquiry committee report on sugar by the federal government, PSMA Chairman Aslam Faruque said an open, fair and facts based discussion was exactly what the sugar industry wanted and that could not happen as long as the findings had not been disclosed. However, it was unfortunate that the minutes of the report were made public, media blew up the whole affair in the hunt for sensationalism. He requested the media that rather than focusing on personalities and always looking to play the blame game, they should study the report with good intentions and for the benefit of the whole country.

“It is clear that the committee has done a lot of hard work in a short span of time but they are dealing with issues that are very complex and often older than our country itself. They simply cannot be understood in a matter of weeks,” Faruque claimed. “While we were happy that the committee heard the PSMA’s introductory presentation on the industry, we wish they had come back and questioned us on the anomalies/queries they encountered before submitting their report as this would have made for a more fair [sic] and clearer report.”

Faruque expressed his desire to continue working with the commission which was taking a deeper look at the industry and requested that this time around, the commission should allot more time to the association so there was no misunderstanding of facts.

Pointing to the alleged biggest anomaly of the report, he stated that on the one hand the report blames export for the rise in ex-mill price of sugar from Rs51.64 to Rs.63.59, and, on the other hand, it clearly lays out that the cost of sugar at Rs180 per maund for 2018-19 of cane was well above Rs63.59. How would the industry and the farmer have survived if the surplus sugar in the country was not facilitated for export and sugar prices stayed at levels that were barely enough to pay for the sugarcane.

“Before the export policy of the PTI government, sugar mills were going out of business and sugarcane growers were in desperate straits. This government should take the credit that it has brought balance back to the sugarcane economy with exports. An investment of Rs3 billion by the Punjab government to facilitate exports not only earned approximately Rs50 billion foreign exchange for the country in a time of desperate need but also the farmers got roughly Rs70 billion more than the minimum support price from the sugar mills in 2019-20 season. If anyone thinks sugar export was such a bad idea, go ask sugarcane farmers how much their economic situation has improved over the last 12 months.”

Finally, the chairman PSMA said that these were only initial remarks and promised that the association would share more comments about the contents of the report after doing thorough reading and analysis.