Sugar sector places onus of high prices on govt

By Masood Anwar

KARACHI (February 07 2006): Sugar trade and production circles have placed the onus of sugar price hike on the flawed policies of the federal government.

“The gap between the production and consumption of sugar in the country was no secret,” they said. “However, the wizards in the finance and commerce ministries failed to foresee the situation,” they lamented.

“The wise men of Islamabad did not take any measure to fill the sugar demand gap at the time when the international market rates were low,” they said. The federal government could have filled this gap by forward booking in the international market through Trading Corporation of Pakistan (TCP), sugar sector sources said. “But all the policy makers woke up at the last moment and ordered for the immediate import of white crystal that not only jolted the national exchequer but also burdened the budget of low income group.”

On Monday, ex-mill price of sugar in Sindh was Rs3,600 to Rs3,650 for a sack of 100 kg while in Punjab it was at Rs3,700 to Rs3,900. In just 10 days, price of the white refined sugar in the wholesale market jumped Rs900 for a bag of 100 kg.

Market sources estimated the landed prices of Indian white refined crystal sugar at Rs37.15 per kg and Rs36.15 per kg of European origin. Although the TCP has stock of 149,795 tonnes white refined sugar, but on the plea of immediate arrival, the country will again pay a heavy price to the suppliers.

“If the government intends to arrest the sugar price in retail through supply-demand mechanism then why is it not offloading commodity in small lots to the retailers,” they asked. TCP has enough sugar stock to push out the market manipulators, hoarders and profit makers, but it is avoiding entering the market, they opined.

“There is no immediate need to import sugar,” they asserted. It is again a high time to direct the sugar mills to import raw sugar and refine it in the country, they said and added that this way more than $10 million would be saved.

At the prevailing prices of white refined sugar in the international market, the import bill would be around $25 million (or Rs1.5 billion). Ironically, before the beginning of sugarcane crushing season, the federal government allowed duty free import of raw sugar but there was no binding of sugar mills for the import, sources reminded.

“Thus, the commercial importers also entered in the field and booked the consignment of the raw sugar.” They opened letters of credit for about 700,000 tonnes of raw sugar but only 450,000 tonnes was offloaded in the country and the commercial importers sold the remaining quantity at high rates in the international market.

The short fall in the import of raw sugar also widened the gap between the production and consumption in the country. Suggesting an immediate remedy, sources said that government should temporarily suspend the 15 per cent sales tax on sugar to ease the cost by Rs4-5 per kg.


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