Problematic surplus sugar
By ASHFAK BOKHARI
is one of the essential items whose export needs to be
regulated to keep the prices of the commodity stable for the
It is in this context that
the sugar millowners’ demand for more exports was rejected
by the Economic Coordination Committee (ECC) of the cabinet
The ECC explained that a
sufficient quantity of surplus sugar needs to be stored in
the country to meet any emergency situation that may arise
from its shortage, often created by hoarders, and sudden
price hike for various reasons.
Many millowners happen to
be politicians, sit in parliament or have close connections
with them. The industry often tends to operate as a cartel
to dictate its terms in the sugar market and extract
benefits from the government.
Pakistan mostly exports white
refined sugar to UAE, Bangladesh, Iran, Sri Lanka, Yemen,
India and some African countries and expects to earn about
$500-- $550 million from exports in the current season.
The surplus stock in 2013-14
is predicted to be around 667,000 tonnes. And the decision
about how much more sugar be exported will be taken in
September-October period when final figures of production
and unsold stocks become available.
This will be in addition to what the Sugar Advisory Board’s
recommended (and permitted by the government), i.e. export
of 0.5 million tonnes. But the millowners argue that there
is room for more exports.
Their representative body,
Pakistan Sugar Mills Association (PSMA), has been vigorously
pursuing for long with the ministries concerned for what it
calls ‘the timely outflow of left-over sugar stock’ and was
successful in the last fiscal year in persuading the
government to allow more exports.
Pakistan’s sugar industry has witnessed surplus production
for the third consecutive year. In 2012-13, sugar exports
were revised to 1.1 million tonnes from the previous
estimates of one million tonnes which left behind reserve
stock of around 0.6 million tonnes.
The PSMA argues that the
production in 2013-14 will be in excess of six million
tonnes and since its home consumption cannot go beyond
4.5-4.8 million tonnes, a surplus of over 1.5 million tonnes
is available for export.
So, what the millowners want is that they should be allowed
to export at least one million tonnes of sugar.
Their request is based on the
narrative, which the ECC has refused to currently entertain,
that sugar mills were incurring losses by selling the
commodity at prices fixed by the government which they claim
do not meet the cost of production.
Hence, under the
circumstances, they would not be able to make payments to
the growers for cane suppliers which only more exports can
enable them to do so.
However, in a letter written
to the ministries concerned, the PSMA has suggested some
improvements in the existing sugar export policy for what it
calls long-term positive results.
The export policy, it says,
should not be time-bound so that the industry could plan its
future investments accordingly. Export incentives were given
for sugar export in 2012-13 and these should be continued in
2013-14 as well.
Besides, the government
should allow export of sugar to Afghanistan and Central
Asian Republics with the federal excise duty rebate, as this
region is the export destination from Punjab and KP. Exports
to this region are eligible to inland freight subsidy.
Regarding building of buffer stock, the ECC has already in
its January meeting allowed Trading Corporation of Pakistan
to procure 75,000 tonnes from the sugar mills in the first
month and subsequently 50,000 tonnes every month.
But the PSMA wants the TCP to
purchase a total quantity of 500,000 tonnes of sugar from
the industry. The ministry of industries fears that sugar
stocks may not be enough to meet the domestic needs of 4.8
The PSMA also wants the government to ensure the viability
of the industry, claiming it suffers from imbalance of
supply and demand. It warns that without disposal of sugar
of over 1.5 million tonnes in excess of domestic demand for
the current year, the entire industry faces the risk of a
In 2012-13, the sugarcane crop benefited from a larger area
under cultivation, and a slight improvement in yields.
Fearing floods, farmers preferred sugarcane over cotton and
Major gains were made in
Sindh, where area under cultivation recovered from 2011-12,
and yields also improved sharply.
Against the target of 59
million tonnes, the overall production reached 62.7 million
tonnes — the second highest after 63.9 million tonnes
recorded in 2007-08.
Pakistan is the world’s sixth largest producer of sugarcane
in terms of acreage, and the 12th largest producer of sugar.
The sugar industry is the country’s second largest
agro-industry after textiles.
In addition to sugar,
sugarcane is used in the production of pharmaceutical
ethanol, fuel ethanol and bagasse for paper and chip board