The sugar industry having a surplus of over one
million tons of sugar is likely to export some 300,000 tons to offset
the persistent financial crunch owing to pile up inventories.
Actually, the export of sugar seems to be the only
way out for streamlining the wheel of the sugar industry especially in
the province of Sindh which produces more than its actual requirement.
Though the insiders of the sugar industry decline to
state categorically but in between the lines indicate that it is the
strong lobby of the industrialists turned politicians having their say
in the power corridors usually oppose exports incentives to the sugar
industry due to their own stake in this sector.
Sugar industry, which is described as the mother
industry which creates jobs for millions of the people of the rural
area, was out of sorts in the province of Sindh due to huge losses and
to following reasons.
always being a sugar surplus segment to the extent of 300,000-700,000
tons. This time it is 400,000 tons of 2002-03 production plus 257,712
tons of carry over stock of 2001-02 season, taking the total surplus to
the level of 657,712 tons.
price was substantially more than in the province of Punjab. For
instance support price at the rate of Rs43 per 40 KGs in Sindh against
Rs40 per 40 KGs in the province of Punjab and NWFP. Moreover the sugar
industry was subjected to pay quality premium to the growers while the
remaining two provinces were not asked to pay the premium.
factor affecting the financial health of this sector was the sales price
that is Rs1.50 kg lower in Sindh as against Punjab and NWFP.
Consequently, the industry in Sindh had to bear additional payment of
Rs2, 477 million during last three seasons from 2000 to 2003.
The cumulative effects of the high cost of sugar
production and low sugar sales price have inflicted huge revenue loss
estimated at Rsu.357 billion in the past three years.
Currently, the sugar industry in Sindh is running
short of liquidity while a large amount of funds held up with the
inventory pipe up and losses have created an un-surmountable situation.
Despite categorical assurances held out by the
government of Sindh for introducing supportive measures before crushing
for 2002-03 however these measures were still awaited. These measures
include concessional bridge financing worth Rs3.50 billion, export of
500,000 tons surplus sugar from Sindh with cost price differential
compensation from Rs3.782 billion earned by federal government on import
of 632,645 tons sugar in 2000-01 sugar season; exemption of sugar
industry from sales tax or reduction of sales tax to 10 per cent.
However, except lifting of around one lakh tons of sugar by the Trading
Corporation of Pakistan from sugar mills in Sindh for exports, no change
has been taken place in other promised areas.
Sugar industry in Sindh feels that steps in support
of sugar industry for disposal of surplus stocks need to be expedited at
the earliest to streamline the cash flow to make timely payments to the
On the part of the government, the relevant
ministries including ministry finance, commerce and industries have
already expressed their willingness to allow sugar export immediately so
that the stocks could be partially cleared to pave the way for the start
of next crushing season.
It may be mentioned that possibility of exporting
sugar to neighboring India was out of question because that country has
already a bumper sugarcane crop as well as sugar production this year.
However, market was still available for export provided the sugar
industry willing to bear the cost of export which may lead to incur a
loss of Rs5 per kg as compared to domestic retail price.
Currently, the average price of sugar in the
international market was reported as $207-$201 per ton as against the
average price of Rs18, 523 per ton in the local market.
There were feelings among the sugar industry that
this important segment of the economy was not in good books of the
international business manipulators. There are fears that these business
forces desire to see Pakistan as a trading nation in this important
sector which is playing an important role in the growth of the rural
economy of this country.
Over the years, Pakistan has developed a strong base
in the sugar industry which is capable to produce export surplus. In the
backdrop of WTO regime ensuing fast in 2005, the government of Pakistan
has to assess the situation well in advance to prevent late hour rush in
rescue of the sugar industry in an effort for enabling it a sustainable
existence, similar to countries with surplus sugar production to promote
exports do so as to reduce stocks. According to PSMA, Pakistan cannot be
an exception to follow such a rule. It is time to evaluate the situation
in consultative environment so that the national sugar industry can play
its pivotal role in development dynamics of rural landmass, in national
economy by export earnings, value-added production and more employment