Monday, 29 December 2014

Punjab PSMA says justified to seek government support

Pakistan Sugar Mills Association (PSMA) Punjab Chairman Javed Kayani has said the sugar industry was justified to ask for support from the government as constant increase in support price of sugarcane by the government every year has resulted in enhanced production of sugarcane.

He said sugar mills were obliged to crush the entire sugarcane crop therefore surplus sugar was not made by choice. Now to make payments to sugarcane growers it is mandatory to sell sugar. Sugar is produced in about four months and sold throughout the year with surplus looming price of sugar remains depressed and forced selling continues in the market to discharge liabilities to growers.

Javed Kayani in a statement issued here on Monday said the government also enforces provision of the Sugarcane Act of 1950 to make payments within 15 days from the date of purchase of sugarcane. This Act though redundant under the present circumstances yet the provision of payment is strictly invoked. Sugar mills make sales which are obviously limited according to monthly consumption of the country therefore they have to resort to borrow from the banks which retain a margin against pledge of sugar.

Therefore, to discharge liabilities to growers, it is imperative to retrieve full value of cost of production. Export parity at the moment is Rs 36 as against cost of producing sugar of Rs 60 per kg @ 180/40kg sugarcane which leaves a deficit of Rs 24 per kg. It is therefore impossible to make payments to sugarcane growers when the industry is not in a position to recover the cost of sugarcane. The Indian government is doling out $64 per ton export rebate on sugar besides giving Rs 660 billion as interest free loans to help and support the sugar industry to make payments to sugarcane growers. It is pertinent to note that cost of production is lower in India compared to Pakistan, Kayani claimed.

The Agriculture Policy Institute of Ministry of National Food Security and Research, Islamabad, strongly suggested to provincial governments not to increase the price of sugarcane this year, as there already exists a surplus produce in the country.

Under the circumstances sugar industry is justified to ask for support from the government when sugarcane prices are fixed unilaterally for political expediency without taking into account the international scenario. The rebate of Rs 8 and inland freight subsidy of Rs 2 will only partially offset the losses. The government has taken this decision in the interest of growers and the industry so that payments to growers can be made through export of sugar for which there is no buyer in the local market besides the initial tranche of 650,000 tons will fetch $300 million in foreign exchange. Disposal of surplus sugar will also stabilise price of sugar in the domestic market, which is currently at Rs 47-48 per kg far from breakeven level of Rs 60 per kg.

The Punjab PSMA Chairman said maligning the industry producing an import substitute of about $2.5 billion, paying taxes to the government in excess of Rs 20 billion and buying sugarcane of Rs 250 billion from growers, was a sinister move and a conspiracy to make Pakistan a dependent consumer state by eliminating the industrial base. "We strongly condemn the malicious campaign and vendetta against the sugar industry," he added.
Copyright Business Recorder, 2014

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