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October 30, 2020

‘Provinces stop sugar supplies to food manufacturers’

Business

October 30, 2020

KARACHI: Provincial governments of Punjab and Khyber Pakhtunkhwa have stopped sugar supplies to food companies, creating unrest among the industrialists including several multinational companies, sources said on Thursday.

The sources said sugar supplies to several companies, including Nestle, Pepsi, Coke and Unilever have been stopped immediately and abruptly at the instruction of district governments in Khyber Pakhtunkhwa and Punjab, including the deliveries for which advance payments have been made.

“This step taken by the district administration is a cause of high business concern,” an industry official said, requesting anonymity. “Sugar is a key ingredient for food-based businesses, and without sugar, manufacturing activity in respect of food related products will come to a complete stoppage, with consequential business related negative impact throughout the supply chain, including for retailers and consumers.”

The official said the industrialists approached the concerned ministers requesting them to intervene in this matter and instruct the concerned individuals to allow resumption of normal sugar deliveries by the sugar mills to legitimate and responsible food sector companies.

The country was exporting sugar until earlier this year, but faced shortages of the sweetener and subsequent price spiral after production fell below annual demand in the last production year. The price has risen sharply after an export scandal.

The government then allowed import of sugar to maintain strategic reserves, stabilise prices of sugar and prevent any possible shortfall at the end of this crop year 2019/20.

Domestic sugar prices have been rising sharply in recent weeks and the government has tried to deflect criticism and boost supplies by cracking down on hoarders and millers whom it accuses of holding back stocks.

Last month, government approved the import of 100,000 tons of sugar to meet possible shortages, while 75,000 tons of white sugar was bought under a tender that closed on August 29.

The government in July allowed the import of 300,000 tons of sugar “to maintain strategic reserves, stabilise prices of sugar and prevent any possible shortfall at the end of this crop year 2019-20.

The government also exempted sugar import from withholding tax and 17 percent sales tax in a bid to lower its domestic prices.

The ministry of food security estimated annual consumption of sugar at 5.3 million tons on the basis of per month consumption of 442,000 tons. The ministry calculated the consumption on the basis of 25 kilogram per capita consumption in the country.