Cane purchase receipts may be upgraded to promissory notes

ISLAMABAD: The federal government is considering giving cane purchase receipts the status of legal tender to facilitate the timely payment of dues to sugarcane growers. The receipts will then be used as cheques issued by a bank or as bills of exchange.

According to documents obtained by The Express Tribune, recommendations have been prepared by the ministry for industries and production and a summary will be sent to the Economic Coordination Committee (ECC) for approval.

The documents indicate that in order to ensure the prompt clearance of grower dues, the cane purchase receipts should have the status of promissory notes.

Growers receive cane purchase receipts from sugar mills upon delivery of the raw material. Growers have complained of not receiving their payments on time as millers usually do not pay growers till the sugarcane has been processed and sold in the open market.

The government has learnt that growers suffer from financial crunch meanwhile and are forced to sell their cane purchase receipts to middlemen at prices lower than those specified on the receipt, said the documents. However, growers will be able to use these receipts as cheques issued by a bank to secure prompt payment, if the ECC approves the ministry’s recommendation.

Millers will then owe banks the amount specified on the cane purchase receipts. It is easier for banks to receive payments from sugar mills due to the standing relationship between the two.

Published in The Express Tribune, December 11^th, 2010.