KARACHI (November 28 2009): Due to 100 percent increase in sugarcane support price by the growers and international increase in furnace oil price and 17 percent general sales tax (GST), the cost of sugar production has increased up to Rs 55 per kilogram. The cost would further increase before reaching the market by adding selling and distribution cost on account of profit or margin.

Sources told Business Recorder that from the beginning crushing season 2009-10, the sugarcane is not available to the sugar mills at Rs 100 and Rs 102 per maund, minimum support price announced by the provincial governments of Punjab and Sindh. "The manufacturers of the commodity are forced to buy the crop at Rs 200 per 40 kilogram, which has caused increase in cost of sugar production," they said.

They said the sugar mills, which have started crushing from first and second week of November are running 70 percent below their capacity due to shortage of crop and being expensive. They said that introduction of middleman during open auction of the sugarcane crop and mass scale production of raw sugar by the commercial players has resulted in artificial shortage of the crop across the country, which has forced the millers to purchase expensive crop from the growers.

"A fresh race has started among the manufacturers of the commodity for getting more and more sugarcane crop for maximum crushing," they added. They said that investors of the sugarcane industry had purchased the entire crop from the growers at the rate announced by the provincial governments for the manipulation of sugarcane prices during crushing season. "Now, the sugarcane is not available at Rs 100 and Rs 101 per maund, a minimum support price announced by the provincial governments of Punjab and Sindh respectively," the millers added.

They said the estimated production of sugar would reduce from 3.4 million tones to 2.8 million tons during the current crushing season due to mass-scale production of "gur" by commercial players and its smuggling to Afghanistan. The commercial players reactive again in the market and manufacturing raw sugar on large-scale by paying comparatively high prices to the growers, they added.

They said the commercial players have started smuggling of gur to the neighbouring country through Chamman and other bordering areas of NWFP due to which the estimated target of 3.4 million tones could not be achieved and the production of sugar would stand at 2.8 million tons. If the government has failed to overcome issue, the country would face another crisis during 2010, they added.

They said Supreme Court (SC) has already ordered the government to impose complete ban on the movement of raw sugar due to crisis in the country, but the government has failed to implement the SC orders. The gur manufactured by the commercial players is being sold at Rs 90 per kilogram in the market and refined product is available in the market at Rs 40/kg, they added.

Copyright Business Recorder, 2009