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Reduction of FED: Prime Minister accused of giving additional incentives to sugar industry




  • Prime Minister Raja Pervez Ashraf has reportedly approved additional Rs 3.5 billion incentives for powerful sugar industry under the guise of reduction in Federal Excise Duty (FED) from 8 percent to 0.5 percent for domestic market, official sources told Business Recorder

    This special gift was given during the last meeting of Federal Cabinet held on March 13, 2013 without formal approval of the Economic Co-ordination Committee (ECC) of the Cabinet. “After consulting the ECC members who were present in the Cabinet meeting, it was decided that the reduced rate of excise duty at 0.5 percent be applicable on local supply of sugar equivalent to the entire quota of 1.2 million tons of sugar allowed by the ECC in its different meetings,” the sources added. 

    The Federal Secretaries of relevant ministries were not present in the meeting at the time when the special incentives were approved. In March, the ECC approved Rs 1.75 per kg inland freight subsidy on a summary moved by the Commerce Ministry on verbal instructions from Awan-e-Sadar. 

    In January this year sugar industry was allowed extraordinary fiscal incentives of about Rs 8 billion for sugar export under the guise of 65 percent freight subsidy and 7.5 percent reduction in Federal Excise Duty (FED). The ECC, in its meeting in December 11, 2012 decided to export 1.2 MMT of sugar, besides directing the Trading Corporation of Pakistan (TCP) to maintain a strategic reserve of 0.5 MMT. The rationale behind this permission was provided by Sugar Advisory Board, taken in its meeting held on November 15, 2012 in Ministry of Industries. 

    During the meeting all the stakeholders including representatives of provinces and sugar industry agreed that current stocks of sugar in the country were 1.5 MMT, whereas, a total quantity of 4.7 MMT would be produced in sugar season 2012-13. The representative of the PSMA forecast that a total quantity of 5.9 MMT of sugar is expected to be available for the year 2012-13 against the annual domestic consumption of 4.2-4.3 MMT resulting in 1.7-1.9 MMT surplus sugar in the country. 

    The FBR is said to have favoured sugar mills of Sindh Zone in a Statutory Regulatory Order (SRO) under the guise of a decision taken by the ECC of the Cabinet last month. Official documents reveal that former Finance Minister Abdul Hafeez Shaikh in a meeting of the ECC observed that a number of incentives have been granted to the sugar industry to facilitate it for exports. However, no feedback has been provided. The ECC was informed that against the approved export of 1.2 million tons of sugar, applications for export of 670,000 tons have since been approved while actual shipment stood at 221,000 tons. The impact of reduction in Federal Excise Duty (FED) has been calculated at Rs 5 billion, most of which will now go only to sugar mills in Sindh. Both Khyber Pakhtunkhwa and Punjab have strongly reacted to the SRO issued by the FBR on February 11, 2013. 

    Copyright Business Recorder, 2013

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