ECC meeting: Govt to buy sugar under millers’ pressure

Decision will allow sugar millers to sell their commodity at higher rates which were expected to come down, otherwise.

The decision will allow sugar millers to sell their commodity at higher rates which were expected to come down, otherwise. PHOTO: FILE

ISLAMABAD:


The federal government on Wednesday decided to purchase 150,000 metric tonnes of sugar from the millers after they threatened to further delay the crushing season.


The decision will allow the sugar millers to sell their commodity at higher rates which otherwise were expected to come down due to availability of the commodity. Analysts term it a government-sponsored downward price rigidity which is also against the notion of free market.

The decision was taken by Economic Coordination Committee (ECC) of the Cabinet, which was chaired by Finance Minister Ishaq Dar.



Overruling its earlier decision, the ECC also decided that sugar mills would start crushing season from November 20 in Sindh and November 25 in Punjab. While allowing the sugar mills to export sugar, the ECC had earlier decided that the crushing season would begin from November 1 in Sindh and November 15 in Punjab.


Ministry of Industries and Production had requested the government on behalf of Pakistan Sugar Mills Association (PSMA) to direct the Trading Corporation of Pakistan (TCP) to procure the commodity from the sugar mills.

The decision will further burden the TCP that already owes over Rs100 billion to various banks, which it borrowed to procure sugar and fertiliser. The decision will also have adverse impact on budget, as the government will also have to bear subsidy on the quantity of the sugar that it supplies to the utility stores and on account of various incidental charges.

The government took the decision after the sugar millers threatened to delay the crushing season, arguing that they still had 650,000 metric tonnes of sugar stocks. The sugar lobby was the fresh addition in the club of lobbies that have so far forced the Pakistan Muslim League-Nawaz government to toe their lines.



The delay in start of crushing season will also delay the sowing of next crops, likely affecting the outputs due to changing weather. The ECC also extended the date for export of 500,000 tonnes of sugar till end December.

The ECC was informed that PSMA cleared Rs1.7 billion off the growers, a claim that has yet to be officially verified.  The ECC was informed that power production from biomass/bagasse by sugar mills would add 1,500MW to 2,000MW in the next three years – an assertion that the sugar millers have been making for last five years.

Published in The Express Tribune, November 7th, 2013.
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