If there is surplus sugar production the government may take the decision to allow its export
he ‘influential’ sugar industry has once again asked the government to allow export of surplus sugar stocks at the start of the new sugarcane crushing season.
The crushing season is about to start in the last week of November after a delay in determining the minimum purchase price by the provincial governments. The Punjab government has raised the minimum purchase price to Rs 300 per maund (40 kg) from last year’s Rs 225 per maund; the Sindh government has fixed it at Rs 302 per maund from last year’s Rs 250 per maund.
The delay in the fixation of the price has already given a two-week cushion to the sugar mills, delaying the start of crushing which usually starts in the second or third week of November. The mills are demanding surplus sugar export on the basis of a bumper sugarcane crop this year that is expected to increase sugar production in the country. The industry is anticipating surplus sugar inventories that it apprehends will create financial problems for the mills like 2017-18. That year the country had surplus sugar and that created a financial crunch for the industry. The mills then withheld the sugarcane growers’ payments until the then chief justice of Pakistan, Saqib Nisar, took suo motu of the matter and ordered the mills to pay the growers.
The millers made profits when the sugar exports were allowed and freight subsidies provided. This also created a shortage of sugar in the country. The sugar export scandal also caused the then prime minister Imran Khan to part ways with Jahangir Khan Tareen who had bankrolled his election campaign. The rift led to a political crisis in the country. The government also formed a joint investigation team to investigate the matter.
After the change of guards in the National Assembly through a vote of no confidence, the PDM-led government was constituted at the Centre. The sugar mill owners are once again lobbying for exports on the pretext of an expected sugar surplus in the country in view of a bumper crop.
The government has been reluctant to allow surplus sugar to be exported due to political consequences of such a decision. A number of sugar mill owners, including the prime minister are part of the cabinet, but the cabinet is not in a mood to allow the export of sugar. The Punjab government, meanwhile, has allowed export of sugar.
Several ministers in the federal cabinet say the crop damage on account of recent floods might result in less production than the initial estimates. According to the Punjab government, the area under sugarcane cultivation has increased by 7.9 percent to 2,318,000 acres from the previous year’s 2,148,000 acres. However, the Agriculture Department expects a 0.3 percent decline in per acre yield.
The PSMA-Punjab zone on November 23 issued a statement claiming that sugar stocks currently stand at 1.2 million tonnes. This was almost 0.275 million tonnes less than the actual inventory. The statement enabled the government to disallow sugar exports at this time.
According to the official numbers, on November 21 sugar stocks in the country stood at 973,000 metric tonnes. Out of this 566,000 tonnes were in the Punjab, 361,000 in Sindh and 46,000 in Khyber Pakhtunkhwa.
On the basis of crop estimates and available sugar, the government postponed a decision on sugar export. Instead, the government is considering keeping around one million metric tonnes of sugar as a strategic buffer, says a government official who doesn’t want to be named.
Federal Finance Minister Ishaq Dar, in a recent meeting with the Pakistan Sugar Mills Association asked that sugar prices be kept unchanged in December 2022. The advice was based on the claims by the PSMA that the industry has surplus sugar stocks.
Government officials say that the Sindh government has determined that the sugarcane crop has been adversely affected in the floods.
According to the International Centre for Integrated Mountains Development (ICIMOD) and Pakistan Agricultural Research Council (PARC), in The 2022 Pakistan floods: Assessment of crop losses in Sindh Province, massive torrential rains inundated the cropland in Sindh and devastated commercial crops on a large scale, causing a loss of $1.7 billion.
Sugarcane is mostly grown in the northeastern districts where flood inundation was relatively less. The damage is estimated at 10.5 million tonnes, or a 61 percent loss of the expected production of sugarcane.
The ICIMOD and the PARC used satellite imagery to assess potential crop production losses for major crops at the sub-district level to support the government’s rehabilitation and compensation planning processes in Sindh.
On the basis of these flood damage estimates, the government is expecting a substantial decline in sugar production in Sindh. Thus, it is possible that the country will see a sugar deficit at the end of this season.
The sugar industry is aware of the situation and the fact that the government has accurate figure of sugar stocks in the country after the implementation of the track and trace system of the Federal Board of Revenue (FBR).
The PSMA-Punjab zone on November 23 issued a statement claiming that 1.2 million tonnes of sugar is available in the country. This enabled the government to disallow sugar exports at this time. However, the government will review the sugar production situation during this crushing season and if production becomes surplus it may take the decision to allow export.
The writer is a business reporter at The News International