The government on Tuesday relaxed a ban on sugar export and allowed the private sector to export 100,000 tons, a move aimed at stabilising prices in the local market and resolving cash flow problems of mills.
The decision was taken by the Economic Coordination Committee (ECC) of the cabinet, the highest economic decision-making body. Finance Minister Dr Abdul Hafeez Shaikh chaired the meeting.
The government had banned sugar export in 2009. On Monday, sugar contracts were settled at $634.2 per ton in the London Futures Exchange.
Javed Kayani, President of All Pakistan Sugar Mills Association, the lobby working to safeguard the interests of sugar mills, cautiously welcomed the move. “It’s a good beginning that will partly resolve our cash flow problems but sugar mills had sought permission to export 500,000 tons,” he said.
The government has already decided to purchase 478,000 tons of sugar to arrest the price fall after millers complained that they were suffering heavy losses.
Ex-factory price of sugar is Rs45-46 per kg while in the wholesale market it is being sold for Rs48-50 per kg. A few months ago, the prices were above Rs65 per kg.
“The decision will partly help increase prices but the government will likely allow export of another 200,000 to 300,000 tons by the end of March due to an expected bumper crop,” said Senator Haroon Akhtar Khan of PML-Q, whose family owns and runs sugar mills.
He said production this year was expected to jump to over 5.2 million tons.
“The decision to allow export was taken after a detailed review of the sugar situation in the country,” said the finance ministry.
In its previous meeting, the ECC had constituted a committee under the chairmanship of Textile Minister Makhdoom Shahabuddin to assess the impact of sugar export and submit recommendations.
The committee, in its recommendations, suggested that 200,000 tons may be exported by the private sector on a first-come-first-served basis.
In the meeting, the ECC was briefed that sugar stocks from the 2010-11 crushing season stood at 900,000 tons and this year’s crop is expected to give a record production of 4.5 to 4.9 million tons. Annual consumption is estimated at 4.2 million tons.
Finance Minister Hafeez Shaikh cautioned the ministries concerned to ensure that no single party benefitted from the export permission and finalise modalities in coordination with the State Bank of Pakistan (SBP).
Cotton purchase proposal rejected
The ECC rejected the textile ministry’s proposal, seeking purchase of one million cotton bales from the Pakistan Cotton Ginners Association for “stabilising falling prices of the commodity”.
The ministry had proposed cotton purchase at Rs6,500 per maund. Had the decision been taken, it would have cost the exchequer Rs6.5 billion.
However, during the ECC deliberations it was observed that only a small stock of less than 10 per cent was left with the cotton growers and any intervention in such a situation would not be prudent.
“The ECC decided that the policy of free market should continue and market forces be allowed to define the prices of cotton,” said the finance ministry. The committee deferred a summary moved by the Ministry of Water and Power for levy of sales tax on hydroelectric power sector and asked the ministry to revisit the committee along with Water and Power Development Authority (Wapda) chairman.
Published in The Express Tribune, February 1st, 2012.
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