Ministry of Industries and Production (MoI&P) has reportedly changed the sugar procurement plan in connivance with sugar lobby which intends to avail an interest-free working capital estimated at billions of rupees against old sugar stocks, sources close to Secretary Industries told Business Recorder.
MoI&P”s sugar procurement plan will be discussed by the Economic Co-ordination Committee (ECC) of the Cabinet in its meeting scheduled on November 6, 2013 to be presided over by Finance Minister, Ishaq Dar, a man close to several sugar mill owners, his critics maintain.
Official documents available with Business Recorder reveal that earlier the MoI&P had proposed procurement of 150,000 tons of sugar from domestic mills through Trading Corporation of Pakistan (TCP) but did not mention sugar stocks of mills in its summary. However, after a story appeared in Business Recorder on October 26, 2013 the sugar lobby influenced the MoI&P and forced the Ministry to amend the summary and sugar requirement from 150,000 MT 650,000 MT to be procured by the TCP. The national procurement agency is already fighting with a few influential sugar mill owners who obtained TCP tenders of a large amount by quoting the lowest price that enabled them to avail interest-free working capital but did not deliver the commodity and caused billions of rupees loss to the national exchequer.
A comparison of summaries dated October 14, 2013 and October 28, 2013 indicate how officials of MoI&P changed the summary. The Finance Ministry has opposed the MoI&P”s increased sugar procurement plan; however it is unclear whether this is supported by the Minister of Finance.
In the first summary, there was no mention of old sugar stocks with the mills which now the Ministry believes is sufficient till March 2013. Documents disclose that as per ECC decision of November 30, 2007, Trading Corporation of Pakistan is required to keep 500,000 MT of sugar at any one time as strategic reserve stocks to keep the price stable in the market in case of any unforeseen situation. The National Sugar Policy 2009-10 emphasises that TCP shall maintain strategic reserves of 500,000 MT of white sugar at any one time and its modalities would be reviewed periodically.
TCP is, however, required to allocate a monthly quota of 50,000 MT sugar to Utility Store Corporation (USC) and also provide sugar to Canteen Stores Department (CSD), Pakistan Navy, Pakistan Army and any other government entities on the directions of the government from time to time. For this purpose, TCP maintains strategic reserves of sugar and is continuously engaged in the procurement of sugar from local sugar mills and also import sugar from international market as per requirements on the directions of ECC of the Cabinet.
Presently, TCP has 31,091 MT of sugar in its stocks from where a quantity of 24,668 MT of sugar is being allocated to USC for October, 2013, leaving a balance of 6423 MT of sugar with TCP in October 2013. The procurement of 100,000 MT sugar is under process which will be utilised for regular quota of USC during November/December 2013. Meanwhile, Pakistan Army has also placed a requisition for a quantity of 12,400 MT of sugar for their utilisation during 2013-14 for which TCP has no reserve stocks.
On the other hand, domestic sugar mills have a sugar stock of 1,828,613 MT which is sufficient till March 2013 at the consumption rate of 390,000 MT per month whereas new sugar will start arriving by the first week of December for session 2013-14.
Based on facts and figures, TCP requires 150,000 MT of sugar for allocation to USC against its quota for January/ February, 2014 and to meet the requirements of Pakistan Army, Navy, and CSD as well. For this purpose, procurement process needs to commence in the first week of November 2013, as procurement cycle takes about 50 to 60 days, inclusive of the time for re-sampling for completion of codal formalities and taking possession of stocks after payment to sugar mills.
MoIP submitted a summary to the ECC of the Cabinet on June 25, 2013, to allow TCP to procure 700,000 MT of sugar for maintaining 500,000 MT strategic reserves including meeting a 200,000 MT combined demand of USC, Navy and CSD. But Ministry of Finance opposed it, as the maintenance of sugar reserves involves a huge carrying cost (the price of holding) and the ECC of the Cabinet vide its decision of June 27, 2013 allowed TCP to procure only 100,000 MT of sugar.
Ministry of Industries has given the following proposals to the ECC: (i) TCP may be allowed to procure 650,000 MT of sugar from domestic sugar mills for maintaining strategic reserves at 500,000 MT and for ensuring smooth supply of 150,000 MT sugar in January/February, 2014 to USC, Pakistan Army, Navy and CSD; or (ii) TCP may be allowed to procure 150,000 MT of sugar from domestic sugar mills for ensuring smooth supply of sugar in January/ February 2014 to USC, Pakistan Army, Navy and CSD.
