LAHORE – The sugar industry has feared that sugarcane crushing may be delayed in presence of around 0.6 million tons of carry over sugar stock.
Pakistan Sugar Mills Association Chairman Javed Kayani pointed out that millers are facing serious financial constraints, as current sugar stocks will last by first quarter of 2018, having serious repercussions on the industry’s capacity to fulfill its fiscal obligations. Addressing a press conference, he maintained that sugar is in surplus in the country and the industry is forced to sell its product below cost, which may result in defaults to banks.
He stated nine mills have been declared bankrupt while four are in shutdown position because of the indifferent attitude of the government towards the plight of sugar industry. He feared that if the situation persists and government does not take measures to clear the carryover stocks, then 2017-18 season may prove the last crushing season.
The government will have to prepare an effective mechanism to dispose of the anticipated surplus production of 3 million tons of sugar, announcing a permanent export policy with an appropriate rebate and tax adjustments to meet the international prices by the local sugar industry. It would enable the sugar millers to clear it payment to the sugarcane growers. The millers by law have to start crushing season maximum by November 30, but it is not possible unless an effective mechanism of disposing the surplus is devised by the government.
Kayani said that the country’s domestic consumption is only 5.5 million tons, leaving the industry with about 3 million tons of surplus sugar if it is not exported, rendering the mills unable to clear dues of the cane growers. He said that demand of rebates and exports were sought to protect the sugarcane farmers interest. The sugar industry had approached the government last year in October 2016 too and informed about the surplus production and demanded 1.5 million metric tons of sugar without any rebates. The international sugar price at that time was $550 per ton. However, delayed decision resulted in downslide of international sugar price to $350 per ton and industry sought rebate on the exports.
The government has allowed export of 925,000 metric tons in different phases instead of one go. This resulted in further burden on the government as well as sugar industry which pledged its stocks with banks to get financial limits to ensure sugarcane growers payment. Kayani flayed the government for regulating the sugarcane prices to benefit the growers and save their rural vote bank but not taking care of sugar mills, which are facing liquidity crisis due to difference between their cost of production and sugar price. The government should either deregulate the sugar industry or buy their production to save them from bankruptcy, he demanded.
The cost of crushing cane to the mill is 50 per kg besides manufacturing cost of Rs9 per kg. On the other hand, exporting sugar at $350 per ton recovers only Rs32 per kg. The difference of cost of production and selling price is Rs23 per kg. In such situation the industry demanded rebate on sugar exports of Rs20 per kg.
He said that delay export will cost heavily to the government, growers and industry which leads to anarchy, as sugarcane growers have already given protest call in Lahore on November 25, 2017 while in some parts of Punjab they had already blocked roads.
Source The Nation