Sugar export: Millers enjoy freight subsidy, but at reduced rate

ECC slashed subsidy to Re1 per kg on export of 500,000 tons.

ISLAMABAD:

The government has slashed inland freight subsidy on export of sugar, but the power lobby of millers will still enjoy a subsidy of Re1 per kg on sale of 500,000 tons overseas.

The Economic Coordination Committee (ECC) of the cabinet, in a meeting held on September 7, slashed the subsidy from Rs1.75 per kg, which was announced by the previous government, documents show.

According to sources, the reduced inland freight subsidy has been offered to the millers on export of 500,000 tons of sugar.

The ECC has allowed sugar mills to export 500,000 tons, of which 250,000 tons will be shipped until October 31 this year and the remaining quantity from November.



Sugar export has been approved on the premise that mill owners will clear outstanding bills of growers worth Rs1.7 billion as estimated by representatives of the Pakistan Sugar Mills Association (PSMA), a lobbying group for millers. The mills are also required to start crushing sugarcane this season in Sindh and Punjab by November 1 and 15 respectively.

The ECC also decided that sugar stocks would be reviewed every month and the State Bank of Pakistan would allocate export quota on first-come-first-served basis. Exports will be made against irrevocable letters of credit or a contract with 25% non-refundable advance payment.

Shipment will be made within 45 days of the registration of a contract with the central bank and the non-refundable advance payment will be forfeited by the government in case of “non-performance”. Full disclosure of quota allocation and its utilisation will be made to ensure transparency and make the information public.

The ECC noted that at present sugar stocks in the country stood at 2.129 million tons.

In a meeting of the Sugar Advisory Board held on September 4, a PSMA representative said six million tons of sugar was expected to be available in the season for 2013-14. Annual domestic consumption will be 4.8 million tons, leaving a surplus of 1.2 million tons.

As a result, SAB recommended that sugar mills should be allowed export of 500,000 tons from the start of October, but exports should not exceed 100,000 tons in a month.

Published in The Express Tribune, September 27^th, 2013.

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