Pakistan cancels sugar contract due to delays

Reuters April 07, 2010

ISLAMABAD: Pakistan cancelled a 50,000-ton white sugar contract with Sadan General Trading on Wednesday on failure to deliver on time.

The country is struggling to meet a demand shortfall of more than one million tonnes.

“We have cancelled the contract awarded to Sadan in February for 50,000 tonnes,” Anjum Bashir, chairman of the Trading Corporation of Pakistan (TCP), which issued the tender, said on Wednesday.

“They were supposed to ship the goods by March 27. They have availed of the penalty clause of 10 days after which we have cancelled the contract.”

The TCP has awarded a separate contract for another 50,000 tonnes to Sadan in a tender opened in March. Bashir said his agency would wait for the company to make delivery according to the tender terms.

“That’s a separate document. We have issued the tender and under that document we are obliged to wait for that (delivery),” he said, adding that the second contract would also be cancelled if the company fails to deliver on time.

Pakistan is buying sugar from the international market after a forecast that its 2009/10 crop would yield about 3m tonnes of white sugar, falling short of annual demand of 4.2m tonnes.

Apart from the two contracts awarded to Sadan, the TCP has also contracted to buy another 250,000 tonnes of white sugar from two other companies.

The TCP is still in the international market through three tenders of 200,000 tonnes each, one to be opened this month and the remaining two in May.

Bashir said after the cancellation of the contract with Sadan, the TCP would likely raise the quantity in one of those three tenders.

The government initially asked the TCP to import a total of 500,000 tonnes of white sugar this year, after which it issued several tenders from December 31 to meet demand and maintain strategic reserves.

But in February, the TCP said it would issue more tenders to buy another 700,000 tonnes if private traders remained wary of using tax breaks to buy supplies.

Bashir said his agency had a mandate to import a total of 1.2m tonnes of sugar this year.

Sugar millers have opposed the import of sugar by private traders fearing falling global prices could lead to a flood of cheap imported sugar. They have demanded a 35 per cent regulatory duty on sugar imports by private traders.


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