KARACHI (February 19 2004): The prolonged holding of 200,000 tons of sugar procured from mills will increase the financial cost as well as the quantum of losses to Trading Corporation of Pakistan (TCP) due to falling sugar prices in the international market.

According to sugar industry sources here on Wednesday, sugar prices have come down in between 196 to 200 dollars per metric ton (MT) from 230 dollars per MT four months ago.

It may be noted that TCP had purchased 200,000 tons of sugar since November 2003, on the instructions of government to bail out sugar industry from financial crisis by exporting procured sugar.

A TCP official confirmed that the corporation will certainly endure significant losses in terms of financial charges and huge difference between procurement and anticipated export prices.

He said the international prices were low while procured prices were equivalent to about 265 dollars a ton. TCP had procured 100,000 tons of sugar in November 2003 at the average price of Rs 15,540 per ton and another 100,000 tons at Rs 14,100 a ton in February 2004, he added.

It will cost 275 dollars a ton to TCP if transportation cost is added, he noted.

He said that TCP was in a process of making recommendation for the federal government on sugar issue. He said the government had sought TCP's advice on the issue of procured sugar.

He said it would be advisable to export sugar as early as possible to reduce losses. But if the government wanted to hold the procured sugar as a strategic stock then it can be held till next season.

He pointed out that TCP was incurring a financial cost for holding sugar stock. This cost will be borne by the government of Pakistan. Though TCP has secured a bank credit on soft terms to finance this transaction, it still carries a financial cost, he added.

However, he did not disclose the quantum of losses.

An office-bearer of Pakistan Sugar Mills Associations (PSMA) Sindh zone said the association has been urging Trading Corporation of Pakistan (TCP) to export the procured sugar to minimise its losses as well as vacate the stock space at mills.

He said the procured sugar was being stored at the premises of mills, occupying sufficient space, which is needed to store new stock from current production.

"We have requested TCP to export procured sugar as soon as possible to create space for new stock," he added.

He pointed out that current production of sugar will reach 3.8 million metric tons and with the carryover stock of 500,000 tons it will cross 4.3 million tons during 2003-2004.

After the maximum domestic consumption of 3.3 million tons, the country will have a surplus stock of "one million tons," he added.

Courtesy Business Recorder