KARACHI: Despite increasing export target from 500,000 tonnes to two million tonnes, the sugar exporters in the country are still reluctant to export sugar as the provincial governments have not agreed to share the subsidy given by the federal government on sugar exports.
The price of sugar in the international market is around $540 to $550 per tonne or Rs 47.50 to Rs 49.77 per kilogram (kg), while the local factory price is Rs 45 per kg including Rs 6 sales tax and Rs one income tax. The local millers are selling sugar at Rs 39 per kg.
“Sindh Cabinet Committee has recently approved additional Rs 9.30 subsidy for the millers in Sindh, but it did not issue the notification in this regard,” the industry sources said. The federal government has already approved and notified subsidy of Rs 10.70 per kg on sugar.
Meanwhile, the Punjab government has assured the millers that it will give 50 per cent of the total subsidy announced by the federation and KPK government has refused to give subsidy on sugar exports. The KPK government is not producing quality sugar for export, the sources claimed.
Pakistan may likely produce about 7.8 to 8 million tonnes of sugar this year, while its total consumption is around 5.2 million tonnes annually.
“The country would have extra sugar of around 2.8 million tonnes in 2018, while around one million tonne of sugar is still present in the warehouses,” said Pakistan Sugar Mills Association (PSMA) Vice-Chairman Iskender Khan.
He said the main issue for the exporters is excess sugar stocked in the warehouses of millers. “We do not have space to stock more sugar in our warehouses and the governments have not agreed to give the announced share of subsidy,” he added.
Khan said that PSMA demanded to allow sugar export in the September to November period last year when the international prices were at $340 to $350 per tonne, but the government delayed the approval and now the prices are around $540 to 550 per tonne.
During the September to November 2017, United States (US) and European countries imported sugar from Sri Lanka, Bangladesh and some African countries among others, he added.
“As long as sugarcane remains an attractive option for farmers with a nominally guaranteed price, barring a significant increase in international prices, Pakistan is likely to continue this annual cycle of excess cane and sugar production followed by subsidised exports,” he added.
Another official of PSMA said that the millers have so far exported more than 400,000 tonnes of sugar till January 2018.
The reports from Islamabad said that the federal government has decided to do away with freight support mechanism on sugar export from next season and directed provincial governments to develop their own policies for such freight support in the future. This decision has been taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet held on November 28, 2017, with Prime Minister Shahid Khaqan Abbasi in the chair.
Meanwhile, the government of Punjab and Pakistan Sugar Mills Association (PSMA), are holding deliberations on the provision of Rs 9.30 per kg freight support ensuring level playing field for the Punjab-based sugar industry.
An official on condition of anonymity said that the decision of Sindh government is a violation of Council of Common Interests (CCI) decision which rejected the proposal of the Sindh government to increase freight support, as after this subsidy, Sindh based exporters can get a subsidy of Rs 20 per kg.
However, sources in Sindh said that the millers are purchasing sugarcane much below the price set by the federal government of Rs 180 per 40 kilograms.
