Sugar industry, federal government at loggerheads over production price

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ISLAMABAD: The sugar industry and the federal government are involved in a bitter dispute over sugar production price of Rs45.86 excluding taxes, determined by the Ministry of Industries and Production (MoIP).

MoIP has said sugar recovery stood at 9.96% in FY18 according to sugar production from sugarcane, although recovery percentage of molasses was recorded at 4.40%, reports Business Recorder.

And the sale price of molasses was Rs12 per kilogram founded on the average export price of molasses in the last five years as per a Pakistan Sugar Mills Association (PSMA) annual report 2017.

However, the MoIP contends the sugarcane price (raw material cost) was Rs171 per kg and the average price of Sindh and Punjab was Rs182 per 40 kg and Rs150 per 40 kg.

Also, the price of one kilogram of molasses was determined at Rs21.12 per 40 kilograms and a net cost of raw material was Rs149.88 per 40 kg.

The inclusion of freight cost of Rs2 per 40 kg raises the total cost of raw material to Rs151.88 per 40 kg.

MoIP has determined the cost of raw material per kilogram of sugar at Rs38.16 per kilogram.

It added sugar obtained from 40 kg of sugarcane was 3.98 per kg at the recovery rate of 9.93%.

As per this determination, the cost of raw material per kilogram of sugar equals the total cost of raw material/sugar obtained from 40 kg of sugarcane of Rs151.88/3.98=Rs38.16 per kilogram.

Moreover, the processing cost of other heads has been ascertained at Rs7.7 per kilogram and this raises the production cost of one kg of sugar to Rs45.86.

MoIP believes the price of molasses disagrees with the sugar industry stating its price is Rs5 per kilogram domestically.

According to sources, a meeting to resolve the dispute between the sugar industry and the government authorities is expected.

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