ISLAMABAD: A handful of sugar barons will get Rs30 billion as subsidy on the export of sugar after the Sindh government doubled the amount for its millers.
On November 28, the Economic Coordination Committee (ECC) of the Cabinet had allowed the export of 1.5 million tons of sugar at Rs10.70 per kilogram subsidy. The subsidy was supposedly to be shared equally by the federal as well as the provincial governments, according to the ECC decision.
The Rs10.70 per kilogram subsidy would have cost Rs16.1 billion to the national kitty, although the finance ministry had not allocated any amount for it in the budget.
However, three days ago, the Sindh cabinet approved an additional subsidy of Rs9.30 per kilogram for the export of surplus sugar. With this, the total money that will go into the pockets of politically well-connected sugar mill owners would increase to Rs30 billion. The Rs30-billion figure is based on the assumption that the entire 1.5 million tons sugar will be exported at Rs20 per kg subsidy.
After the Sindh government’s decision, the Pakistan Sugar Mills Association’s Punjab Zone has already threatened to suspend sugarcane crushing just one week after starting it. Through an advertisement, the PSMA has now demanded that the government of Punjab should also give Rs20 per kg as subsidy.
A total of 15 sugar mills that are based in Sindh will now get Rs20 per kilogram subsidy. The export quota will be approved and monitored by the State Bank of Pakistan on first come first serve basis. Since it is now more lucrative for the Sindh-based sugar mills to export the commodity, the possibility is that they will avail most of the quota. The Sindh cabinet was informed that the Sindh-based mills have at least 500,000 tons as surplus stock.
The politicians belonging to Pakistan Peoples Party, Pakistan Muslim League-Nawaz faction (PML-N), PML and Pakistan Tehreek-e-Insaf or their close relatives and friends own almost all the sugar mills in Pakistan. This could become a major scandal for the federal and provincial governments, if probed by the National Accountability Bureau (NAB), said officials in the federal government.
The federal government has already decided that it will come out of business of giving subsidy on sugar exports – but only after the 2017-18 crushing season.
“The federal government shall not provide any freight support for the export after crushing season 2017-18 and the provinces should develop their own policies for such freight support, whenever required in future,” according to the ECC’s decision of November 18.
The Sindh government had given an additional subsidy on the claim that the production cost of sugar has soared to Rs64.19 per kg. Therefore, purchase of sugarcane at higher prices was not feasible until and unless millers are allowed the export of surplus and given subsidy at Rs20 per kg because the price in the international market is very low.
Sugar price in the international market is roughly Rs40 per kilogram while domestic consumers are forced to buy at Rs65 per kg.
The officials said that the claim by PSMA that the subsidy of Rs10.70 was not sufficient to clear the commodity stocks is belied by the fact that the earlier quota of 500,000 tons was taken by sugar mills within 30 days of the notification by the SBP. Out of 500,000 tons, more than 200,000 tons sugar was exported till November 25.
The decision by the Sindh government is also said to be in violation of the decision of the Council of Common Interests (CCI) where the proposal Sindh to increase freight support was rejected in its last meeting on November 25.
Published in The Express Tribune, December 8th, 2017.