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As per global demand, Pakistan needs to enhance sugar production

A research report revealed that from 2017 to 2026, global population is predicted to increase almost 8 percent and also sugar consumption about 16 percent during the same period. It is written in the United States department of agriculture (USDA), world sugar production of 2017-18 is predicted at 179.636 million tons as compared to consumption of 171.559 million tons. This explains that during 2017-18, sugar price may remain at the lowest ebb because of increased supply and declining demand. It is also calculated that the higher production is predicted for Thailand, India, China and European Union as well.

In the report which was published during 2017, ISO has expected a world sugar production of 179.3 million tons with consumption of 174.664 million tons, entailing a world surplus of 4.636 million tons with an impact on sugar prices. Although Pakistan’s sugar industry is urging the government of Pakistan to reinstate export subsidies after a steep decline in international sugar prices has slowed shipments, adding to a local surplus just as the country prepares to harvest a record crop. As long as global sugar prices remain below local rate in the country, export subsidies and quotas are predicted to be a feature of Pakistani sugar strategy. It is said that officials have implemented subsidies during all but one (2016-17) marketing year since 2012-13, but the current quota of 2.0 million tons is by far the largest.

As long as sugarcane remains an attractive option for growers with a nominally guaranteed price, barring an important rise in global prices, the government is expected to continue this yearly cycle of excess cane and sugar production followed by subsidized exports. Different sources mentioned that in late 2017, the government raised its sugar export quota from 500,000 metric tons to 2.0 million metric tons in an attempt to move accumulated sugar stocks off the local market as harvest swings into gear. A freight subsidy of up to $97 per metric ton (Rs.10.7 per kg) applies to the entire quota amount, bringing potential total expenditures on sugar export subsidies to $194 million.

In the country, growers produce cane for 87 sugar mills that are required to pay a government-organized indicative price for sugarcane. While discounts for quality and water content are often applied to the indicative prices, the certainty of a nominally guaranteed price creates an incentive for farmers to produce sugarcane in areas within delivery distance of a sugar mill. Furthermore, millers are able to recoup some of their cane procurement costs by selling into Pakistan’s inflated local sugar market where prices are shielded from lower-priced imports by a 40 percent tariff. However, because indicative sugar cane prices are so attractive for farmers, cane production in present years has tended to exceed the needs of the local market, resulting in a high-priced exportable surplus that, more often than not, requires a subsidy to be competitive on global markets.

 

Sugar industry’s statistics revealed that Pakistan’s domestic market is presently trading at $487 per metric ton, nearly $100 above recorded global prices. Preliminary export statistics suggests that international buyers are purchasing Pakistani sugar with exports of 260,000 metric tons from September to November. According to trade sources, Sri Lanka, Bangladesh, and certain African countries are the major buyers thus far. If I take example of India which is said to be a big competitor of Pakistan in the sugar industry, where the sugar production is at record highs and prices are relatively low. Presently it is said that to enhance the sugar industry’s productivity the government of India has removed the duty on sugar export in order to enhance foreign sales of the sweetener and lift its domestic prices as the country is facing excess production of the commodity. Presently, there is an export duty of 20 percent on raw sugar, white or refined.

Indian industry experts reveal that this will assist in sustaining demand and supply balance and also on revenues which is predicted Rs.75 crore per annum at present export volumes. Different Research reports also mentioned that India is probable to have a record production of almost 29.5 million tons of sugar in the season 2017-18, a rise of 45 percent over the previous year, pulling down local sugar prices by over 15 percent in the last six months.

The sugar season in India runs from October to September, but crushing of cane starts in December and continues till March and April. It is also identified that the domestic consumption of the sweetener is predicted to be almost 25 million tons. In February, Indian government has risen the customs duty on sugar imports to 100 percent and restricted its sale by sugar mills in order to control the declining prices. The move was to check the dumping of heavily subsidized sugar from states like Pakistan and to protect the interests of growers at a time when the country’s sugar production is predicted to exceed the consumption. Furthermore, it is also said that Pakistan has already exported 1.5 million tons of sugar to India, with the product being subsidized by the government.

Conclusion

No doubt, sugarcane growers continued to suffer as the millers are not paying them as per Government of Pakistan proclaimed rate. Unluckily the millers are currently deducting up to 22 maund per 100 kg as Katooti (deduction). It is said that the actual deduction is 3 kg per maund. The Government of Pakistan should strictly take action on this and also provide the best facilities to the growers to enhance the productivity of the sugar industry.

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