PSMA urges SBP to extend credit line deadline

Sugar mills press govt to deregulate industry, allow export of surplus stock

LAHORE:

The Pakistan Sugar Mills Association (PSMA) has urged the State Bank of Pakistan (SBP) to extend the deadline for settling outstanding credit lines of sugar mills until December 31, 2024. The request, made through a letter to the SBP governor, comes as the sugar industry faces mounting financial pressure

According to a press statement released on Saturday, in its appeal, the PSMA highlighted the unique challenges facing sugar mills, which produce a year's worth of sugar within just three months while making payments to sugarcane growers within 15 days of delivery. To manage these large financial obligations, the industry relies on credit lines from commercial and Islamic banks, using sugar stocks as collateral.

The industry currently holds 7.54 million metric tonnes (MMT) of government-verified sugar stocks, exceeding domestic consumption, which is estimated at 6 MMT. Despite repeated requests, the government has only allowed the export of 0.15 MMT of the 1.5 MMT surplus, leaving the industry in a precarious position.

PSMA officials argue that without the ability to export surplus sugar, it will be impossible for mills to settle approximately Rs200 billion in outstanding loans by the original deadline of September 30, 2024. This financial strain could lead to delays in the upcoming crushing season, potentially disrupting sugar production and payments to growers. They have requested the SBP to issue instructions to all banks to extend the date till December 31, 2024, for sustaining the local sugar industry causing import substitution of nearly $4 billion. Furthermore, the PSMA is of considered opinion that the government is underestimating the brewing crisis that would erupt at the start of crushing season due to enormous surplus sugar stocks and it would not be possible for the sugar industry to timely start the crushing season until the present surplus stocks of sugar get sold in the market.

Adding to the pressure, global sugar prices have surged by $60 per tonne, reaching $586 per tonne, largely due to developments in Brazil. PSMA officials argue that this creates a golden opportunity for Pakistan to export surplus sugar and earn $600 million in foreign exchange.

"Deregulating the industry will ease the problems of the sugar industry. Allowing timely exports will not only stabilise the industry but also benefit farmers and consumers by ensuring fair cane prices and a steady sugar supply," the PSMA concluded.