ECC likely to incentivise export of sugar in meeting today

Commerce ministry wants excise duty to be slashed from 8% to 0.5%.

ISLAMABAD: The Economic Coordination Committee (ECC), which is scheduled to meet on Thursday (today), is likely to approve a ‘bailout package’ for millers to help them export sugar. The move may end up costing the national kitty billions of rupees in foregone tax revenues.

The commerce ministry has moved two summaries to the ECC, proposing a subsidy and a reduction in the rate of federal excise duty (FED) imposed on sugar mills as incentives to export the sweetener. In its proposal, the commerce ministry has asked that the rate of FED on sugar mills be slashed from 8% to 0.5% as incentive for them to export the commodity.

The ECC had earlier approved the export of sugar, but farmers could not benefit from the decision due to delays in its implementation.

Sikandar Khan, former chairman of the All Pakistan Sugar Mills Association, says that the government should have allowed the export of sugar back in January 2012, when prices were around $750 to $800 per ton. “But prices have now dropped to $500 per ton. If sugar is not exported, farmers will be stuck with dues that they cannot pay off,” he added.

Review of wheat stock and flour prices

As the flour prices crisis worsens – flour prices have recently jumped sharply by around Rs7 per kilogramme – the ECC has also sought a briefing from the Ministry of National Food Security and Research on the position of wheat stocks in the country and the prices of flour. An official of the ministry has said that the country holds 7 million tons of wheat stock, which was enough to meet the country’s requirements. “There is no demand-supply gap, and the high prices of gas, power and transportation costs have likely led to the hike in flour prices,” he said.

Review of the energy situation

Along with the flour crisis, the energy crisis is also on the ECC’s agenda. The country is currently relying largely on thermal power generation due to a cut in hydel generation due to canal closures for the winter season. Power ministry officials say that the country is facing a manageable 2,500 megawatt power shortfall, but that people are facing an undue 15 hours of load-shedding. The unavailability of gas for the power sector is also affecting generation, and power plants are forced to run on expensive oil. The economic body will review all these issues in its meeting.

LPG-air mix project

The ECC will also consider a summary moved by the petroleum ministry for the approval of Sui Southern Gas Company’s (SSGC) LPG-air mix project, which is expected to raise gas tariffs by an average 9.9% for all consumers except domestic consumers.

The petroleum ministry is seeking approval for a 50 million cubic feet per day LPG-air mix plant that is to be installed by SSGC to inject gas in the system at the higher rate of Rs2,400 per million British thermal unit (mmbtu), against the existing price of Rs422 per mmbtu.

Published in The Express Tribune, January 10^th, 2013.

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