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August 15, 2020

Govt’s delayed decisions cause increase in sugar prices

Top Story

August 15, 2020

LAHORE: Delayed decisions by the government caused increase in sugar prices as it also wrongly calculated estimates of sugar availability in the country.

According to the Sugar Advisory Board (SAB) headed by Federal Industries and Production Minister Hammad Azhar, the meeting held on May 11 estimated that the country will have 0.271 million metric tons of sugar at the end of ongoing season of 2019-20 as the sugarcane crushing of the new season would be kicked off and fresh production added in the supplies. The SAB also observed that the total sugar stocks in the country as of May 8, 2020 was 3.365 million metric tons while country needed 3.094 million metric tons of sugar for the next seven months (till December 2020) on basis of monthly national consumption of 0.442 million metric tons.

The annual consumption of sugar is calculated by the Ministry of National Food Security and Research (MNFSR) and was submitted to the SAB meeting on March 18, 2020. According to the MNFSR calculation, total annual consumption of sugar would be 5.3 million metric tons on the basis of per month consumption of 0.442 million metric tons instead of 5.5 million metric tons. The MNFSR calculated this consumption on the basis of 25 kilogramme per capita consumption in the country. In the May meeting of SAB chaired by Hammad Azhar, it was decided that no sugar would be imported as satisfactory sugar stocks are available in the country. However, the SAB ordered constant monitoring of it through SAB meetings. But no meeting was held in June 2020 to monitor the situation and make decisions accordingly.

Interestingly, the same stocks became insufficient for the country requirements on the same consumption formula calculated by the MNFSR in March 2020. In the SAB meeting held on July 22, 2020, the sufficiency of the same old sugar stocks reduced to mid of November instead of end of December of the previous meeting.

The SAB in the July meeting stated that “the government needs to import white sugar 300,000 metric tons to maintain strategic reserves, stabilise prices of sugar and prevent any possible shortfall at the end of this crop year 2019-20”.

According to July 22 meeting minutes of SAB, “the comparison was being drawn between the current stocks and stocks in the last SAB meeting, it was pointed out that during the previous meeting it was agreed that stocks were sufficient to last till December 2020. However, the current stock position shows that stocks will last only till mid-November 2020. Hammad further elaborated that as per data presented, the offtake/consumption pattern on Punjab were drastically higher in the last 20 days as compared to the offtake/consumption in May and June. Javed Kayani, senior member Pakistan Sugar Mills Association (PSMA) said the reasons why the figures show such a high offtake was because of an error in reporting in previous figures wherein for certain sugar mills more stocks were shown than were actually available. The PSMA also clarified that stock data was collected directly from sugar mills by the cane commissioner office without involvement of PSMA. He highlighted that previously stocks data was confirmed as correct by PSMA representative in the last SAB meeting. He expressed serious concerns on this offtake/consumption pattern in the last 20 days in Punjab and directed the Cane Commissioner Punjab to explain stocks collection process.

Interestingly, SAB meeting on May 11, 2020 was attended by the then PSMA chairman Nauman Khan – an aide of Jehangir Khan Tareen. Both have escaped from the country after proceedings ordered by the government in the light of findings of the Sugar Inquiry Commission report.

According to the meeting minutes, the Cane Commissioner Punjab explained to the SAB in July meeting, “The discrepancy in the data is due partly to a change in method of data collection. Till the submission of the previous report on July 2, mills used to provide data directly to Cane Commission office, whereas now from last 20 days deputy commissioner offices collect data of sales on daily basis from the mills. Lifting of sugar has increased since local administration directed the mills to ensure lifting of sold stocks. PSMA’s senior member Javed Kayani asserted that the discrepancy is due only to error in the reported data and not due to increase in consumption.

PSMA Chairman Zaka Ashraf endorsed his statement and also clarified that stocks data is collected directly from sugar mills by Cane Commissioner without any involvement of the PSMA.

Interestingly, despite all increase in offtake of sugar from mills did not support the argument of increase in sugar consumption all of a sudden as the MNFSR calculated it for the whole year consumption pattern. The MNFSR calculated country’s consumption for whole year and on the basis of that calculation availability of the sufficient sugar stocks were estimated in March and May meetings of the SAB which were chaired by PM’s adviser on industry, trade and production Razak Dawood and Industries and Production Minister Hammad Azhar respectively. The total available stocks of the sugar remained unchanged ie 5.352 metric tons despite increase in offtake/consumption pattern. Hence, on the basis of the MNFSR calculated formula, sugar is available in the country.

The whole wrong estimates were initiated by the previous head of the SAB, Razak Dawood, and the then mover and shaker of PSMA, ie its ex-chairman Nauman Khan – an aide of Jehangir Khan Tareen. Despite the fact that Punjab government in February asked Prime Minister Imran Khan for allowing duty-free import of sugar besides immediately imposing ban on its export, no decisions were made by the government.

Punjab’s former chief secretary Major Azam Suleman (retd) asserted the need of importing sugar at the earliest to the prime minister in a meeting held in Lahore during the regular visits of premier to the city to look after the provincial matters.

However, despite alarm bells, the then head of SAB and PSMA officials kept the government in dark which is now resulting in unprecedented increase in sugar prices and crossed Rs100/kg barrier. Now the government has allowed import of 300,000 tons of sugar and tenders were being opened. However, it will take minimum one month to complete the process and arrival of the first consignment of sugar conditioned to not any delay from any quarter. Thus, it is expected that the price of sugar is likely to further increase in the coming days as the government was unable to intervene in the market with buffer sugar stocks.

On the other hand, according to a presentation of the Urban Unit (Punjab) almost 0.216 million metric tons of sugar shortfall is estimated in November 2020 on the basis of available sugar stocks in Punjab of 0.907 million metric tons on the basis of report by the deputy commissioners, against the requirement of 1.123 million metric tons in Punjab and KP.

Federal Industries and Production Minister Hammad Azhar while talking to The News said when he took over the charge of SAB it was informed that season started almost with 300,000 surplus sugar against the total annual consumption of the country.

“In the first SAB meeting which I chaired, the PSMA officials and cane commissioners again endorsed that surplus sugar was available by the end of season in December and even some asked for allowing export of surplus”. However, the new representatives of the PSMA said previous officials communicated wrong data of the available sugar stocks in the country and sugar production to the government against the actual sugar data, he added.

“However, I instructed the cane commissioners of the provinces to change the methodology of data collection sugar stocks from the mills and collect data through physical assessment,” he further added. The Punjab and KP implemented the decisions and gathered data accordingly which could be the one reason of difference between the earlier reported available stocks of sugar and current shortage.

According to the data, the offtake/consumption pattern of Punjab in May-July 2020 witnessed an unprecedented hike of 400,000 tons from the last year consumption of 700,000 tons to this year offtake of 1100,000 tons. “Punjab is instructed to investigate this unprecedented offtake,” he said, adding that institutions were also instructed to look into the matter that why the sugar prices were increased, especially the ex-mill price.

Hammad said anticipating a shortage of sugar in mid-November on the basis of sugar mills stocks data, government timely decided for importing 300,000 tons of sugar which will control the sugar price. Further, he said since there is no mechanism to check sugar stocks available with the dealers and shopkeepers so the government has to make decision on the basis of sugar mills stock data. The sugar mills stocks data shows expected shortage in mid-November just before the start of a new crushing season, so the decision of importing sugar is made timely, he added.

To a question that why the government did not consider the recommendation of import of sugar made by Punjab in February 2020 on the basis of production shortage during the crushing season, he said since the Cane Commissioners and PSMA data suggesting sufficient surplus stocks available by the end of crushing season ie December 2020 so the import could not be allowed. “The government did not have any other data source to make decision of allowing import of sugar,” he added.

However, Punjab Food Secretary Asad Rehman Gilani talking to The News said there was shortage of 150,000 to 200,000 metric tons. To a question that how the Urban Unit calculated accurate shortage of 216000 tons, he said “food department knows the exact situation as it falls in its purview and Urban Unit also made estimates on the basis of food department data. Further, the situation of offtake/consumption of sugar is changing on daily basis so accurate numbers could not be provided,” he added.

To another question that how the SAB in May meeting mentioned that sufficient stocks of sugar were available in the country and import was not required while in July on the basis of same availability of stocks figures, shortage of sugar estimated and 300,000 tons import recommended, he said since the scrutiny of sugar mills and dealers alongside action was initiated by the government against those holding Benami stocks that was also released.

To a question that how one will fall in the category of hoarders of sugar when one is doing his private business and purchased some (A) quantity of sugar from sugar mills and releasing and selling it in to the market according to his business model, he said if someone purchased sugar or anything else and making reasonable profit from it then it did not fall in the category of hoarding. However, unusual and windfall profit could not be allowed by creating shortage of any product either sugar or anything else, he asserted.