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Imposition of penalty on sugar mills: ECC rejects MoC’s proposal




  • Economic Co-ordination Committee (ECC) of Cabinet has rejected Ministry of Commerce’s proposal regarding imposition of penalty on sugar mills for failing to ship allocated quota within 45 days and constituted a committee to devise mechanism for timely export of 0.4 million tons of sugar, official sources told Business Recorder. 

    The committee comprised Prime Minister’s Special Assistant on Agriculture, Kamal Majid Ullah (convenor), and Secretary Ministries of Commerce and Industries. Giving the background sources said ECC in its meeting on October 3, 2012 constituted a committee to negotiate with the sugar mills, with a view to encouraging them to utilise the already approved quota for export. 

    The committee held a meeting with the representatives of sugar mills on October24, 2012. The following was unanimously agreed: (i) unutilised or partially utilised quota of already allowed export of 100,000 tons and 200,000 tons of sugar may be cancelled; (ii) all sugar mills may be allowed to apply for the export of sugar from this quota, subject to furnishing of an undertaking to the effect that they have the required quantity of sugar for export; (iii) the quota of sugar shall not exceed 10,000 tons per sugar mill and this shall include the quantity already allowed to mills out of 200,000 MT of sugar; (iv) this exercise has been undertaken to improve the liquidity position of the sugar mills so that the growers are paid in time and at the rates fixed by the government; (v) the export of unutilised/ partially utilised quota of sugar under the new authorisation will be 135,834 tons and has to be exported within 45 days from the date of the SBP circular. The extension in the time period of export, if required, may be allowed to such consignments in which confirmed irrevocable letters of credit have been opened within 45 days. 

    The ECC, in its meeting on November 22, 2012 was also informed that according to information furnished by Ministry of Industries, out of 300,000 tons of sugar already allowed for export, only 100,000 tons of sugar could be exported, meaning thereby that 400,000 tons of sugar, including the export allowed earlier but not exported, can be exported now. Besides, the Special Assistant to the Prime Minister on Agriculture has proposed that the Ministry of Commerce might seek approval of the ECC for export of a total quantity of 400,000 tons (200,000 tons allowed by the ECC in its decision of October 3, 2012 + unutilised/ partially utilised quota of 135,834 tons of earlier allowed export + additional export of 64,166 tons), which would be in consonance with the purpose of sugar export ie to increase liquidity in the sugar industry for payments to growers. 

    It was also intimated that the Pakistan Sugar Mills Association has proposed that quota restriction of 10,000 tons per mill may be abolished and in addition booking be made against confirmed irrevocable letters of credit or against 25 percenr- 50 percenr advance payment. If the exporter fails to ship the sugar within 30 days, 10 percenr fine of total order value of form “E” will be imposed to avoid fake registration of Form “E”. Consequently, the Ministry of Commerce sought approval of the ECC to the following: (i) in case the exporter fails to ship sugar within 45 days, 10 percenr fine of the value of confirmed L/C or advance payment may be imposed; and (ii) a total of 400,000 tons (200,000 tons allowed vide ECC decision dated 3rd October, 2012 + unutilised/partially utilised quota of 135,834 MT of earlier allowed export + additional export of 64,166 MI) of sugar may be allowed to be exported. 

    During the discussion, the ECC noted that the general sense prevailing in the country is that there is surplus sugar in the country, especially with the start of new crushing season. Prices of sugar in the international market have started descending. Thus, in order to improve the liquidity position of the sugar mills for enabling them to pay to sugarcane growers, a timely decision with regard to allowing export was need of the day. It was also stated that the proposed restrictions/conditions are likely to discourage export and a mechanism may be devised to ensure timely export of sugar without any restriction/condition. The committee will submit its report to the ECC in its next meeting after meeting with the sugar mills. 

    Copyright Business Recorder, 2012

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