Sugar export: Finance Division to bear entire freight subsidy cost

Export Development Fund refuses to release money for payment to sugar millers.

ISLAMABAD:

The Economic Coordination Committee (ECC) of the cabinet has asked the Finance Division to repay the amount taken out of the Export Development Fund (EDF) for payment of inland freight subsidy to sugar millers on the export of the sweetener.

The directive came in the wake of refusal by the EDF board to release money for the inland freight subsidy, sources say.

Now, the Finance Division will solely bear the burden of the entire inland freight subsidy to be paid to the mills for shipment of sugar.

According to the sources, the Finance Division had taken Rs1 billion out of the EDF for payment of freight subsidy to the millers on May 9 this year. However, the EDF board of administrators did not agree with the withdrawal of funds, arguing that it was not liable to bear the freight subsidy under the EDF Act.



The ECC, in its meeting held on December 11, proposed that its earlier decision on providing funds out of the EDF for freight subsidy should be reviewed and the Finance Division be advised to provide the whole amount of Rs2.6 billion to the Trade Development Authority of Pakistan (TDAP), which comes under the Commerce Division.

The ECC – the apex economic decision-making body – said this keeping in view the stance taken by the EDF board and the fact that sugar mills were pressing hard for release of the subsidy in line with the ECC’s earlier approval.

On March 6, the ECC had approved freight subsidy of Rs1.75 per kg for export of 1.2 million tons of sugar. It said since the initiative was an incentive for exports, the Finance Division should arrange funds from the EDF. Accordingly, the Finance Division was asked to provide Rs2.1 billion out of the EDF.



Later on September 7, the committee allowed export of an additional 500,000 tons of sugar and granted freight subsidy of Rs1 per kg on shipment of that quantity.

However, the Finance Division expressed its inability to release funds to the TDAP and insisted that the need for inland freight subsidy would be met from the EDF.

According to the sources, the sugar millers pocketed billions of rupees at the expense of consumers following an ECC decision that allowed the mills to delay the crushing season and asked the state-run grain trading agency to purchase 150,000 tons of sugar from the mills.

The ECC also approved export of 500,000 tons of sugar to enable the millers to dispose of their unsold stocks. In the wake of alleged market manipulation, sugar prices in the country shot up rapidly as the millers failed to export the commodity.

The millers termed the price hike a temporary phenomenon, but during that period they made billions, sources said.

Published in The Express Tribune, December 28^th, 2013.

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