LAHORE - The Pakistan Sugar Mills Association Punjab Zone has asked the Punjab government to allow Rs.9.30 per kg export rebate as has been announced by Sindh government for sugar mills of Sind, saying otherwise Punjab mills will suffer huge losses.
The industry sources said that mills have a carryover stock from previous crushing season and in addition to it the sugar production is expected to reach to the tune of 8 million tons during the current crushing season. In view of it, federal government has recently allowed export of 1.5 million tons of sugar with rebate of Rs.10.70 per kg.
The PSMA said even with this amount of export rebate Pakistani mills will be unable to recover cost of production of sugar at the prevailing sugar prices in the international market. Keeping in view the situation, the Sindh cabinet has decided to grant an additional subsidy of Rs9.3 per kg for the export of surplus sugar, in order to resolve the ongoing dispute between growers and sugar mills owners.
The PSMA Sidh Zone says that the production cost of sugar comes to Rs64.19 per kg. Therefore, purchase of sugarcane at Rs182 per kg was not feasible for them until and unless they were allowed to export the surplus sugar and given Rs20 per kg subsidy on it because the sugar price in the international market was very low,” minister added.
It may be noted that the Economic Co-ordination Committee (ECC) of the cabinet has allowed the export of 1.5 tonnes of sugar and a cash freight support of Rs10.7/kg even then the millers are not ready to start the crushing.
Therefore, in order to resolve the matter the cabinet approved the remaining amount of subsidy of Rs9.3 per kg on the export of sugar. Chief Minister Syed Murad Ali Shah said that there must be a condition for the sugar mill owners to clear the liabilities of the growers to qualify for availing the subsidy.
The spokesman of PSMA Punjab Zone said that Punjab government should immediately announce additional Rs.9.30 per kg export rebate for sugar mills of Punjab otherwise the mills of Punjab will not start crushing. The sugar industry stakeholders have feared that sugarcane crushing may be delayed in presence of around 0.6 million tons of carry over sugar stock. They pointed out that millers are facing serious financial constraints, as current sugar stocks will last by first quarter of 2018, having serious repercussions on the industry’s capacity to fulfill its fiscal obligations.
They stated nine mills have been declared bankrupt while four are in shutdown position because of the indifferent attitude of the government towards the plight of sugar industry.
The government will have to prepare an effective mechanism to dispose of the anticipated surplus production of 3 million tons of sugar, announcing a permanent export policy with an appropriate rebate and tax adjustments to meet the international prices by the local sugar industry. It would enable the sugar millers to clear it payment to the sugarcane growers. The millers by law have to start crushing season maximum by November 30, but it is not possible unless an effective mechanism of disposing the surplus is devised by the government.
They said that the country’s domestic consumption is only 5.5 million tons, leaving the industry with about 3 million tons of surplus sugar if it is not exported, rendering the mills unable to clear dues of the cane growers.