PHOTO: APP
The government is considering a proposal to deregulate sugarcane prices, while taking all provinces on board in a bid to eliminate bailout packages for sugar barons.
The plan was tabled before the Economic Coordination Committee (ECC) in its meeting on December 7. It was proposed that prices of sugarcane be deregulated from next season onwards so that the government’s involvement and provision of subsidy is eliminated.
The issue arose after different sugarcane prices were fixed by provincial governments. The ECC now wants all provinces on board to deregulate prices of sugarcane in a bid to end subsidy involved in sugar exports before placing the plan before federal cabinet for formal approval.
It further directed that while submitting case to the federal cabinet, the sponsoring division should also propose appropriate percentage of the subsidy amount to be committed for research and development.
Earlier, a committee represented by the Pakistan Sugar Mills Association (PSMA) highlighted problems currently faced by the sugar mill owners and growers.
The prime minister constituted an inter-ministerial committee under the chairmanship of the commerce minister to address the issue.
Disparity of prices
During the committee’s meetings, the PSMA highlighted the disparity in sugarcane prices as governments of Punjab and Khyber-Pakhtunkhwa (K-P) set it at Rs180 per 40 kg, while Sindh notified Rs172 per 40 kg in 2014-15, out of which it paid Rs12 and millers paid Rs160 per 40 kg to the growers.
Furthermore, sugarcane price fixed by the provincial governments was higher than the prices worked out by the Agriculture Policy Institute.
Hence, the increase in support price leads to higher sugarcane produce and higher cost of production. They further said that the ECC had earlier given permission for export of 650,000 tons with Rs10 per kg in cash support, but only 542,076 tons could be exported.
It was suggested that the cash support was not sufficient for the sugar barons to compete effectively in the international market because of which they failed to achieve the export target.
Subsidy confusion
The ECC allowed export of 0.5 million tons sugar while shifting half of the burden of sugar export subsidy on to provinces that will be required to release over Rs3 billion for the mighty millers. The total subsidy approved stands at Rs6.5 billion.
Though the Ministry of Commerce, in its summary, sought subsidy on the export of 250,000 tons, to the surprise of many, the ECC ignored the proposal earlier this month and allowed export of 500,000 tons.
In the meeting, Planning and Development Minister Ahsan Iqbal suggested that sugar mills should spend 10% of the subsidy on research and development activities. As a result, the ECC increased the subsidy to Rs13 per kg for the remaining quantity, which would be included in the 500,000 tons allowed for export this month.
According to the Ministry of Industries and Production, sugar production is expected to be 5.13 million tons in the 2016 season compared to estimated consumption of 4.8 million tons. After adding 300,000 tons left from the 2015 season, a surplus of around 630,000 tons is expected to be available for export in the new season.
They pointed out that a number of tenders were floated by the Utility Stores Corporation (USC), but no sugar mill was willing to commit supplies, making it difficult for the USC to play the role of a price stabilising agent for domestic consumers.
Published in The Express Tribune, December 24th, 2015.
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