FUTURE PROSPECTS FOR SUGAR EXPORTS

The export of sugar seems to be the only way out for streamlining the wheel of the sugar industry

By AMANULLAH BASHAR
June 23  - 29, 2003 

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.

1. Sindh 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.

2. Sugarcane 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.

3. Another 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 growers.

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 generation.