No more public auctions of sugar: TCP official

KARACHI: The government has stopped the Trading Corporation of Pakistan (TCP) from releasing sugar to the open market through auctions.

The decision announced by the Council of Common Interests (CCI) has reversed an earlier order by the same authority to offload 250,000 tons of the sweetener in the open market through the TCP.

“Of the 250,000 tons the TCP was earlier ordered to offload, 77,000 tons have already been sold,” said a high-ranking TCP official, adding: “No more auctions for open market will be held now.” However, the corporation will continue to provide sugar to provincial governments.

To this end, the CCI has instructed that the quota for provinces be increased from 100,000 tons to 200,000 tons. The Punjab government’s allocation for sugar has been doubled to 100,000 tons. Sindh may procure up to 34,000 tons, while the remaining quantity has been earmarked for Khyber-Pakhtunkhwa, Balochistan, Gilgit-Baltistan and Islamabad Capital Territory.

“Once the TCP started selling sugar through auctions to traders and the government warned of action against hoarders, sugar prices came down very quickly,” said the official while talking to The Express Tribune.

Recent auctions conducted by the TCP received anything but a warm response from the market. An intended auction for 20,000 tons of the sweetener opened last Monday failed to secure any suitable bids. An earlier attempt to auction 10,000 tons, on November 12, also secured bids for just 6,000 tons.

“Since sugar price was capped at Rs67 per kilogramme in Punjab, dealers have started buying it from the provincial government as it is off-loading in the market at Rs65 per kg,” said the TCP official.

He explained that the average landed cost of sugar imported by the TCP is Rs65 per kg, making this the lowest possible rate the corporation could offer. “Add to this taxes and transportation expenses and sugar from the TCP will cost a private party about Rs72 per kg which is more than the rate offered by provinces.” Bidders who participated in the latest auction were given the option of raising their bids to match the landed cost borne by the TCP, however they did not agree. TCP officials contend that this shows that the market is anticipating a further fall in the price of sugar.

Published in The Express Tribune, November 20^th, 2010.