Sugar barons have the last laugh
The phrase itter-sweet aptly characterises the relationship between the sugar industry and the concerned government authorities in the recent past. For nearly six months, the two have been at loggerheads over sugars official procurement and local market prices. It appears that after much haggling and wrangling, the sugar barons have their way, as the bone of contention may soon be resolved. A little background is in order here. As per official estimates, the last sugar cane crushing season-marketing year 2010-11 (MY11)-produced sufficient sugar to meet local consumption and reserve requirements. Foreseeing that sugar mills would have to sit on surplus stocks for much of the year and incur financial charges, the Pakistan Sugar Mills Association lobbied hard to authorities to buy sugar. Since May this year, PSMA has been trying to persuade the authorities to buy white sugar from mills to ease the latters liquidity issues. Though the Economic Coordination Committee had approved in the same month the purchase of sugar from local mills (50,000 tons per month) for replenishing strategic reserves, the procurement never actually went ahead. The issue of pricing created the deadlock! The authorities fixed the official procurement price at Rs.60 per kg and rejected the ex-mill price of Rs.64 per kg put forward by the industry. The sugar mills, too, did not want to sell at such low price. Things went sour afterwards. It was in mid-July that the ECC decided not to procure the first lot of 50,000 tons of sugar until December, owing to satisfactory situation of strategic reserves at the time. The ice finally melted and this tussle lost steam, when in early November, the Trading Corporation of Pakistan (TCP) issued the tender for procurement of 200,000 tons of refined sugar from PSMA member sugar mills. The tender invited bids in lot sizes ranging from 5,000 tons to 20,000 tons. On Saturday, tomorrow, the bids would be opened at noon. Voila! There are some interesting yet intriguing aspects to this game-set-match between the authorities and the PSMA. For one, the authorities bowed down before the influential trade association and decided against last months proposal in ECC to import 100,000 tons. This about-turn reeks of panic on the authorities part as the PSMA member mills made good on their earlier posturing that they won start the MY12 sugar cane crushing season owing to clogged up liquidity in previous stocks. Thus far, crushing has started on a limited scale, mostly in Punjab. In addition, the pricing issue currently appears to be less thorny than before, as the tender floated by the TCP does not mention anything on price. The detailed TORs are only available to the PSMA member mills and sugar traders have been kept out of this particular bidding. Moreover, the fact that the tender has been floated by TCP-which comes under the Commerce ministry-and not by the Ministry of Industries, shows that the aggressive manoeuvres of the Minster for industries, Pervez Elahi, have proven futile. Recent news suggested that Pervez Elahi was adamant on arranging for the import of sugar and urea through the MoI, and even sought Presidents intervention towards that end. Ironically, the PSMA is paying tributes to the same MoI which had wanted to import sugar and had angered the association earlier by fixing a low official price for sugar. While the sugar barons have the last laugh, it is hoped that the MY12 crushing season starts soon so that growers are able to manage their cash flows and plant the Rabi seasons crop before its too late.