Govt doles out Rs274m in subsidy on sugar export

Shipments lead to artificial shortage, price rise in domestic market

ISLAMABAD:

The government has paid about Rs274 million in subsidy on export of 21,133 tons of sugar since announcement of the concession, but it has led to artificial shortage of the commodity and pushed prices higher in the domestic market.

According to an official in the Ministry of Commerce, of the total sugar exports so far, around 19,000 tons have been shipped to Afghanistan only and the remaining quantum has gone to Saudi Arabia and Malaysia.





The official disclosed that sugar millers had also booked orders for the remaining quantity out of a total of 500,000 tons for which the subsidy was granted in December 2015.

The Economic Coordination Committee (ECC) of the cabinet has approved export of 0.5 million tons of sugar with a subsidy of Rs13,000 per ton. This has not only pushed prices of the commodity upwards, but has also created artificial shortage in certain parts of the country where prices have gone up more than 20%.

On the other hand, import of sugar has also become expensive as the government has imposed a 40% regulatory duty, giving an opportunity to the millers to manipulate the situation.

According to government statistics, since the approval of export subsidy, prices of the commodity have increased from Rs57 to Rs62 per kg.



Officials see a brewing sugar crisis that the country may face in coming months as they believe that mill owners are exporting as well as holding back domestic sales in order to demand higher prices.

A meeting on Thursday of an inter-ministerial committee, headed by Commerce Minister Khurram Dastgir Khan, reviewed sugar price movements in the market and noted an unwarranted increase despite falling rates in the international market and availability of sufficient stocks in the country.

The inter-ministerial committee had been tasked by the ECC, while allowing export of surplus sugar stocks, with reviewing the stock and export levels every month.

The industries secretary told the meeting that the country had stocks of 2.25 million tons and the on-going crushing season would continue until mid-April, which would further add to the pile.

Therefore, abundant sugar is available in the country whereas its monthly consumption is 0.4 million tons.

The inter-ministerial committee, in its first meeting in January, had decided that it would recommend discontinuing sugar exports if prices in the domestic market rose more than 10%.



In its next sitting, the committee was told that the retail price had gone up from Rs57.20 per kg on December 10, 2015 to Rs62.07, up 8.5% but less than the 10% ceiling set by the committee.

However, as surplus stocks are adequate and international prices are coming down, the price increase in the country is incomprehensible. And with production continuing in the crushing season, prices should go back to previous levels in coming days.

An official of the commerce ministry revealed that in the previous meeting the special committee proposed that sugarcane prices should be deregulated and market forces should be allowed to determine the rates.

However, the provincial governments dismissed the proposal, arguing that matters related to agriculture fell within the purview of provinces, which have powers to take such decisions.

Talking to The Express Tribune, Pakistan Sugar Mills Association Chairman Iskander Khan rejected the perception that prices had increased due to sugar exports, saying sufficient stocks were available for domestic consumption.



Instead, he argued, prices went up as a result of the government policy that had set sugarcane price at Rs180 per 40 kg to support the farmers. “The wholesale price of sugar is still Rs56 to Rs57 per kg, but we are not responsible for controlling the retail market.”

Explaining the downtrend in global market, Khan said prices there stood at Rs40 per kg on the back of much lower sugarcane prices compared to Pakistan. He suggested that the government must not interfere in the business and let market forces fix the sugarcane price.

Published in The Express Tribune, February 13^th,  2016.

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