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Utility stores: Ministry proposes procurement of additional quantity of sugar




  • Commerce Ministry has proposed the procurement of an additional 100,000 Metric Tons (Mt) of sugar from local mills to meet the requirement of Utility Stores Corporation (USC) for March and April 2014, official sources told Business Recorder. The sources said the procurement of 150,000 MT of sugar assigned to TCP as per ECC”s November 6, 2013 decision is in progress. 

    This quantity is meant to meet monthly requirement of USC (i.e. 50,000 MT per month) for January and February, 2014 as well as other government entities including CSD, DGP Army and Pakistan Navy, etc. The sources said the sugar industry is buying sugarcane worth about Rs 270 billion every year and contributes in Rs 25-30 billion annually to the national exchequer. It is now poised to become one of the leading suppliers of affordable and indigenous energy to the national grid. 

    The sources said current year surplus can be taken care of by the following steps: (i) export of one million tons of sugar from Pakistan through a subsidy which reflects international market reality. During the last crushing season (2012-13) approximately 1.2 million tons of sugar was successfully exported and it is suggested that the same policy should be maintained with necessary improvements. (ii) according to sources, the government is considering the following measures with regard to sugar export policy; (a) export policy should not be time bound; (b) same export incentives as given in 2012-13 may be allowed in letter and spirit; and (c) 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. It is pertinent to note that such export is entitled to inland freight subsidy also. 

    The sources said, an inter-ministerial meeting will be held soon to hear the viewpoint of sugar industry on sugar export policy. A representative of State Bank of Pakistan (SBP) will also be invited to the meeting. The sources said, the government will consider the procurement of a total of 500,000 MT of sugar from the sugar industry as buffer stock. This stock will be in addition to the purchases currently being made by TCP for supply to USC. Buffer stock will not be sold back in the market this season except in an emergency, for instance, if prices rise to unexpected levels in Ramazan. 

    The sources further stated that industry is suffering from an imbalance of supply and demand: production is estimated in excess of six million tons while consumption is limited to 4.5 million tons thereby a surplus of over 1.5 million tons is available for export without the disposal of which, from the supply and demand mechanism for the current year, the entire industry will plunge into a financial debacle. 

    The sources further stated the first two cogeneration plants (totalling 52MW) are due to be commissioned by March 2014 for which tariff determined by the NEPRA is Rs 10.41 which is one of the cheapest tariffs available at present. The sugar industry maintains that if level playing field is given , it has a potential of producing and supplying to the national grid a total of 2,500MW of electricity within the next 5 to 7 years. This will entail an investment of about $2.5 billion ($1 million per MW), all of which will contribute to GDP growth. In addition, all mills that get into cogeneration will perforce have to undertake steam economy and plant efficiency which will directly increase annual investment in the entire sector. The industry foresees an investment of half a billion dollars for this purpose as well, the sources continued. 

    This will result in lower electricity tariffs due to fuel cost savings of more than $800 million annually ($25 billion over 30 years) from utilising a cheaper fuel and additional foreign exchange savings of $1.4 billion annually (more than $40 billion over 30 years) from utilising an indigenous fuel. 

    Copyright Business Recorder, 2014

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