ISLAMABAD: The powerful sugar millers have got billions of rupees in extra income with a regular hike in sugar prices, though prices of the input – sugarcane – have remained almost static for the last three years.
The disclosure was made in a meeting of the Economic Coordination Committee (ECC) of the cabinet held on December 28, 2016.
Apart from the price increase, the sugar millers are receiving a huge monetary incentive from the national kitty. The current government has provided over Rs10 billion in bailout packages on the export of sugar.
The Inter-Ministerial Committee, constituted by Prime Minister Nawaz Sharif, assessed price trends in the international and domestic markets and noted that sugar rates had dropped from $597 per ton in September 2016 to $490 on December 20, 2016 in the world market. The committee found that the sugarcane price had remained stable at Rs180 per 40 kg in Punjab since 2014-15 and was slightly increased by Rs10 in Sindh in the current crop year.
However, the retail price of sugar in the domestic market during the week ended December 15, 2016, according to the Sensitive Price Indicator, stood at Rs62.61 per kg compared with Rs54.12 in December 2014 and Rs57.16 in December 2015.
During discussions in the ECC huddle, Minister of State for Information Technology Anusha Rahman referred to minutes of the Sugar Advisory Board meeting held on December 19, 2016.
The board was informed that sugar prices had been regularly increased over the years despite virtually no change in sugarcane rates for the last three years. The chairman of Pakistan Sugar Mills Association, a lobbying group of the millers, claimed that their production cost had increased and it now stood at Rs64-65 per kg.
He boasted that Rs230 billion worth of outstanding payments had been made to the sugarcane growers and foreign currency valuing $132 million was earned through sugar exports.
The Textile Industry Division secretary revealed that less area had been planted with sugarcane crop, which could lead to a decline in production in the next crushing season.
The National Food Security and Research Division secretary countered that the cultivated area had not gone down, in fact, sugarcane production was expected to fall because of unfavourable weather conditions.
It was noted that in case sugar exports were allowed, domestic prices may further increase.
However, according to some meeting participants, 0.871 million tons of sugar was in surplus that could be exported after consumption of 5.525 million tons for 13 months in the country at the rate of 0.425 million tons per month.
The Sugar Advisory Board had agreed on the production estimate of 5.4 million tons for crop year 2016-17 with carryover stocks of 0.996 million tons.
It recommended export of 0.3 million tons by March 13, 2017 while keeping 0.53 million tons in strategic reserves.
However, the ECC allowed sale of 225,000 tons overseas, setting aside fears of lower production and price increase in the domestic market.
Published in The Express Tribune, January 11th, 2017.