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May 27, 2020

Sugar Commission never mentioned NPMC’s failure to control prices

Top Story

May 27, 2020

ISLAMABAD: The Sugar Inquiry Commission has never mentioned National Price Monitoring Committee (NPMC) at federal level and provincial governments failure to take any action when sugar millers earned windfall profits of Rs40.5 billion through jacking up prices at domestic market.

Although, the ECC at time of granting approval for exports of sugar had mandated an inter-ministerial committee to look at prices of sugar in domestic market and recommended reversal of exports if price escalate but it was not mentioned who would be chairing this inter-ministerial committee and what the commission proposed to take action against them after facing failure.

The price control is domain of the provincial governments so the commission did not throw any light on fixing responsibility of failure to take any action despite witnessing sky rocketing prices of sweetener in the domestic market. The commission only held Sugar Advisory Board responsible for taking any action.

The Sugar Inquiry Commission stated that the exporters of sugar gained benefit in two ways: firstly, they were able to gain subsidy and secondly, they made profit from the increasing sugar prices in the local market.

There was no shortage of sugar in the market but still the price increased from Rs55 per kg In December 2018 to Rs71.44 per kg in June 2019 although the GST increase was implemented from July 1, 2019. In the same period, the ex-mill price increased from Rs51.64 kg in December 2018 to Rs67.42 per kg in November 2019. The mills were making reasonable profits at the ex-mill price of Rs51.64 per kg in December 2018.

“With the increase in prices due to export, hoarding and market manipulation, the sugar sector earned an extra profit of Rs40.57 billion,” the commission found.

On the request of Commerce Division, a meeting of Sugar Advisory Board (SAB) was held on 11-09-2018. The agenda proposed by the Commerce Division was to review the overall availability and stock position of sugar and to workout exportable surplus, if any. The Secretary Min NES&R explained that due to water shortage, low production of sugarcane was expected in the upcoming season. After consultation of all the stakeholders, it was concluded that total surplus sugar availability by the end of the season will be 1.962 MMT. After deducting the strategic reserves of two months i.e. 0.866 MMT, there would be net surplus of 1.096 MMT, therefore it would be safe to recommend export of 1.00 MMT without making it time bound. SAG also recommended a Monitoring Committee, headed by Joint Secretary (P50) Mo l&P to ensure the availability of sugar in the country on monthly basis.

On 28-09-2018, Commerce Division forwarded their recommendations to the ECC. The ECC, in its meeting held on 02-10-2018 decided to: I. Allow export of 1.0 MMT of sugar, no freight or financial support to be provided to millers/exporters by the federal/provincial governments, the Inter-Ministerial Committee will meet fortnightly to review sugar stock, export and price situation.

In case of any abnormal increase in domestic price of sugar, the committee would recommend to the ECC of the Cabinet for discontinuation of further exports. The export quota shall be monitored and implemented through SBP.

On 04-12-2018, in the ECC meeting, following were allowed (i) Export quota to be enhanced by 0.1 MMT, without any freight support, (ii) Since the entire issue of freight support arose due to varying procurement prices of sugarcane fixed by the provincial governments, therefore, the freight support may be determined/paid by the respective povincial governments, if deemed appropriate.

iii) The ECC directed Finance Division to release Rs2.0 billion for the payment of outstanding claims of freight support for sugar export, being federal share.

The SAB should have considered that if the increase in price of sugar was not due to shortage of stocks, the intervention of the government was necessary to counter the market manipulation. The ECC had asked the inter-ministerial committee to closely monitor stocks, price of sugar and recommend discontinuation of further exports, in case of abnormal increase in the domestic price of sugar. The contention that the export was not discontinued because export commitments to China were to be honored, does not hold much weight. The export only to China could have been allowed to continue. This intervention was required to curtail the manipulative activities and give a clear message to the market about the seriousness of the government to intervene and control the prices through ban on exports.

The commission is of the opinion that the Sugar Advisory Board failed to take a timely decision to ban the export of sugar. The price hike and the export continued till February 2020.