Sindh approves additional subsidy of Rs9.30 per kg to facilitate sugar exports

ISLAMABAD: The Sindh government has upped the ante by approving a subsidy of Rs30 billion for sugar millers to facilitate exports of the commodity.

In an Economic Coordination Committee (ECC) cabinet meeting held on November 28^th, it was approved to permit export of 1.5 million tons of sugar at Rs10.7 per kg, reported Express Tribune.

Subsidy approved was originally scheduled to be shared equally between the federal and provincial governments, as per ECC decision. This subsidy had not been provided for in the federal budget 2017-18 by the finance ministry and would have cost national exchequer Rs16.1 billion.

A few days ago, Sindh government approved an additional subsidy of Rs9.30 per kg to facilitate export of surplus sugar available. This additional subsidy approval would ensure additional revenue would increase to Rs30 billion.

This calculated Rs30 billion is based on presumption that all 1.5 million tons of sugar would get exported at Rs20 kg subsidy. This has raised a storm as Pakistan Sugar Mills Association Punjab Zone has warned of sugarcane crushing suspension and published an advertisement demanding Punjab government to give them Rs20 per kg subsidy to them as well.

Approval of additional Rs9.30 per kg subsidy by Sindh would mean total of fifteen sugar mills get Rs20 per kg subsidy now. State Bank of Pakistan (SBP) will give go-ahead and monitor export quota on a first come first serve basis.

There is a distinct possibility that Sindh-based sugar mills could take majority of the quota for export of the commodity. Sindh-based sugar mills are said to hold a surplus stock of sugar amounting to 500,000 tons, the provincial government was informed.

This additional subsidy by Sindh government was provided on pretext that production cost of sugar had surged to Rs64.19 per kg. They said procurement of sugarcane at higher prices was unsustainable so providing additional subsidy would provide incentive to millers for exporting the surplus quantity since prices in global markets were still very low.

Sindh’s decision to grant additional subsidy to the millers is said to be a contravention of the decision of Council of Common Interests (CCI), where its request to raise freight support was not approved in last meeting held on November 25^th.