In January 2013, the ECC approved the rebate, saying the federal excise duty on local supply of sugar would be 0.5% instead of 8%. PHOTO: FILE
The present government of Pakistan Muslim League-Nawaz (PML-N) has given its backing to the grant of sugar rebate by the previous Pakistan Peoples Party (PPP) administration, though the concession benefited only the millers of Sindh and penalised others running businesses in Punjab and Khyber-Pakhtunkhwa.
The rebate was offered to exporters following the decline in sugar prices in the international market, but the facility was not provided for exports through land route to Afghanistan and the Central Asian States. This had upset the sugar millers in Punjab and Khyber-Pakhtunkhwa.
Pakistan Tehreek-e-Insaf senior leader Jehangir Tareen and sugar millers of Khyber-Pakhtunkhwa, where the PTI is running its government, also challenged the decision in the Lahore High Court. The court directed that clarification should be sought from the Economic Coordination Committee (ECC) whether the rebate was in conformity with the decision of the committee or not.
The PML-N government, however, endorsed the PPP’s move in an ECC meeting held on April 30.
According to officials, the Federal Board of Revenue (FBR) said the ECC in its earlier meeting held on November 22, 2012 considered a summary submitted by the Ministry of Commerce and permitted the export of sugar because of abundant stocks.
However, the Pakistan Sugar Mills Association (PSMA), a lobbying group, sought some type of rebate on exports in order to compete in the international market, where prices stood low.
In January 2013, the ECC approved the rebate, saying the federal excise duty on local supply of sugar would be 0.5% instead of 8%.
The reduced duty was applicable to the local sales equivalent to the quantity exported by sugar manufacturers in accordance with the export quota and was available on submission of the proof of export.
The ECC decided that the remaining local supplies would continue to be subject to 8% federal excise duty.
The FBR clarified that the finance minister also approved a draft SRO containing the condition that the rebate facility would not be provided for exports via land route to Central Asia and Afghanistan.
According to the FBR, exports to Afghanistan and via Afghanistan to the Central Asian Republics were regulated by the Export Policy Order 2009, which envisaged that exports should be allowed via land route against Pakistani rupees whereas the purpose of granting concession for sugar exports was to realise revenues in foreign exchange.
PSMA Chairman Sikandar Khan said the rebate facility was discriminatory keeping in view the sugar mills running in Khyber-Pakhtunkhwa. The mills in the province were located close to the Afghan border and exports were also to be made to the Central Asian States.
Khan said 90% of the cost of sugar production comprised the price of sugarcane and applicable duties and suggested that the government should reduce the tax to Rs1 per kg from Rs4 per kg in the upcoming budget.
“The government should give direct subsidy to the farmers instead of providing it to the millers,” he remarked.
Published in The Express Tribune, May 10th, 2015.
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