Monday September 27, 2021

‘High production cost pushes sugar price up’

April 07, 2021

LAHORE: Exorbitantly high cost of sugarcane crushing in Pakistan leads to increase in sugar price at the retail level in Pakistan compared to neighbouring India, documents showed on Tuesday.

Against the average sugarcane price of Rs259 per 40-kilogram in Pakistan, local sugar industry is adamant to sell sugar at ex-mill price of Rs93 per kg. In sheer contrast, fair and remunerative price of sugarcane in India was set at equivalent of 238 Pakistani rupees per 40kg for 2020/21 season while sugar price was fixed accordingly at 64 per kg Pakistani rupees, according to the documents.

The assessment mechanism for ascertaining cost of sugar manufacturing in the country is lopsided, according to people with knowledge. It does not include income of sugar mills from all products made out of sugarcane – including from sale of molasses, bagasse, press mud or imputed value and ethanol.

Sources said cost of locally produced sugar, which has been calculated by federal ministry of industry and production, is pegged at Rs76 per kg for most of the mills. However, due to high manufacturing cost of some inefficient mills, the ex-mill price was fixed at Rs80 per kg, giving further financial gain to other mills on top of 15 percent profit.

Sources said government should also set minimum sugar price which would help in determining sugar cost of manufacturing as a reference rate. Cost of energy for sugar mills in India and Pakistan are almost same as bagasse is used for heating and power generation. There is not much difference in other costs.

Inefficiencies in the local sugar industry should be eliminated in order to make it competitive not only for the sake of providing cheap sugar in the local market but also make it viable in the international market, according to the sources. There is a need of fixing price of sugarcane on the basis of sugar contents. It would make fair payments to farmers and further lead to more realistic calculation of sugar cost.

According to a media report, Indian sugar industry formally quoted Rs61.60 per kg price of sugar inclusive freight charges and delivery at godown through land route. This price is far below the price of local sugar if 17 per general sales tax is removed on the commodity.

All India Sugar Trade Association Chairman Praful Vithalani said Pakistan can only get sugar at prices, quality and speed with lowest freight from Indian traders. “Through land route via Punjab, white sugar would cost about $398 per ton which includes freight charges and delivery at godown,” he added. Trading Corporation of Pakistan scrapped earlier two tenders for import of sugar because of high quotes. The lowest bid it received was around $540 per ton.