The federal government on Wednesday allowed millers to export 500,000 tons of sugar and slapped 20% regulatory duty on its import aimed at discouraging overseas purchases as prices in international markets are lower than rates in the domestic market.
The Economic Coordination Committee (ECC) of the cabinet also formally endorsed the decision of increasing the wheat support price by 8.4% or Rs100 to Rs1,300 per 40 kilogrammes. However, it deferred a decision on providing electricity to farmers at subsidised rates. The meeting was chaired by Finance Minister Ishaq Dar.
While allowing the sugar millers to export half a million tons, the ECC directed that shipments be made within 45 days of registration of a contract. If they fail to ship the commodity within the timeframe, their advance payments will be forfeited, said a press release issued by the Ministry of Finance.
The committee asked the millers to export the permitted quantity by March next year. It also slapped 20% regulatory duty on sugar import. In 2008, the PPP government had waived duties when the country was facing a shortage of the commodity.
In the international market, sugar was available at $430 per ton, which was far lower than prices in the domestic market.
The decisions came following Pakistan Sugar Mills Association’s (PSMA) demand that the government should impose duty on sugar import and allow export of 1.5 million tons.
Even after export of that quantity, the country would have one million tons of sugar in surplus, the association said. It has estimated sugar production in the new crushing season at 5.7 million tons.
The ECC also asked the provincial governments to ensure that mills paid all the dues to sugarcane growers and sugarcane crushing started on time.
The ECC endorsed the wheat support price of Rs1,300 per 40 kg following finance minister’s anticipatory approval to facilitate the farmers. The government had also slapped 20% regulatory duty on wheat import.
Mari Gas
The ECC also agreed on the replacement of Mari Gas Company’s cost-plus gas agreement with a market-oriented crude oil-linked formula.
It decided that the company’s 88% of undistributed balance of Rs10 billion would be transferred to the government as redeemable preference share capital after meeting all legal and corporate formalities. The remaining 12% would be issued to the general public, ensuring that their shares in the company are fully protected.
The government has been giving $20 million per annum to Mari Gas as exploration expenditure by deducting gas development surcharge of provinces for the last 20 years.
Now, the government has allowed Mari Gas to raise wellhead gas price without evaluating the oil and gas reserves explored with the help of state financing and the transfer of these reserves to the government, said officials of the Ministry of Petroleum and Natural Resources.
However, no due diligence has been conducted so far. The government had the right to raise its share in the company due to the financing it provided over the last 20 years, they added.
During the Musharraf regime, this replacement formula was abandoned on the ground that the government would have to face a loss of Rs40 billion as it could not get the explored oil and gas reserves.
Mari Gas was also asked to invest Rs5 billion, which was refused by Fauji Foundation. According to officials, the financing had been made from GDS and therefore this proposal should have been moved to the Council of Common Interests (CCI) to seek its input.
Published in The Express Tribune, November 13th, 2014.
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The current year sugar cane crop is alarming due to absence of rains and we are exporting that is called foresight planning