Economic Co-ordination Committee (ECC) of the Cabinet has declared stock and production figures of sugar, presented by Pakistan Sugar Mills Association (PSMA) as non credible and refused to approve fiscal incentives until crushing season ends, well informed sources in Commerce Ministry told Business Recorder.
The sources said the ECC was informed on February 2013 that according to the Pakistan Sugar Mills Association (PSMA) sugar mills were incurring losses, as they sold sugar at prices below cost of production in view of sugarcane prices fixed by the government. This might eventually stall cane payment to growers. Moreover, as production is estimated in excess of six million tons while consumption is limited to 4.5 million tons, a surplus of over 1.5 million tons is available for export.
The PSMA was quoted to having proposed that: (i) export of one million tons of sugar may be allowed without any unnecessary conditionality; (ii) export policy should not be time bound; (iii) same export incentives as given in 2012-13 may be allowed in letter and spirit; (iv) export through Afghanistan and Central Asian Republics should also be entitled for FED rebate as major export of Punjab and KPK takes place in this region. (Such export is entitled to inland freight subsidy also); and (v) TCP should purchase a total quantity of 500,000 tons of sugar from the sugar industry as buffer stock.
The meeting was further informed that the projected surplus sugar stocks were equal to 0.667 million tons for the Season 2013-14 which should remain in the country for utilisation in case of emergency shortage and resulting price hike; and the decision to allow further sugar exports be taken in September-October 2014, when actual figures, regarding production and stocks would be available.
It was pointed out that Finance Division maintains that inland freight subsidy was agreed to in anticipation of disposal of surplus stocks by the sugar mills and in the wake of foreign exchange pressures; and any subsequent arrangements for crushing season 2013-14, at this early stage, could not be committed. However, the situation may be reviewed, at an appropriate time, factoring in the overall demand and supply situation and prices in the international market. Finance Division also opposed PSMA”s proposal that export policy should not be time bound.
It was also pointed out that according to FBR, the proposal to reduce rate of FED from 8% to 0.5% on local sale of sugar needs to be reviewed by the ECC in the context of revenue loss. Besides, they have not supported the proposal to provide the incentive of reduced FED on local sale of sugar equivalent to sugar exported by land route to Afghanistan and CARs.
The following proposals were submitted for approval of the ECC: (i) the decision to allow further sugar exports may be taken at the end of sugar season in the month of September-October 2014; (ii) it would not be appropriate to accede to the PSMA”s proposal that export policy should not be time bound; (iii) the subject of Federal Excise Duty (FED) pertains to Federal Board of Revenue. Their views/comments on the proposal regarding FED may be considered for approval; and (iv) the issue of maintaining of sugar stock was considered by ECC of the Cabinet in its meeting held on 28-01-2014. It was decided to allow TCP to procure 75,000 MT from the sugar mills in the first month and subsequently 50,000 MT every month. The ECC also directed the Ministry of Commerce/TCP to submit an updated report of the sugar stock position in the last week of February 2014. As directed by the ECC, the Ministry of Commerce/TCP will submit a detailed report accordingly for further orders of the ECC.
The meeting observed that the sugar mills holding export quota of sugar allocated by the State Bank of Pakistan have not been able to fully export the quantity of sugar allowed earlier by the ECC notwithstanding the fact that the allowed export was time bound. Moreover, no credible figures were available on the stock and the expected production of the commodity. It was also observed that the carrying cost of maintaining the proposed strategic buffer stock was prohibitive.
