In an informal chat, one of the sugar mill owners told Business Recorder that each Sindh-based sugar mill earned billions of rupees last year due to a disparity in sugarcane price in Punjab, Khyber Pakhtunkhwa and Sindh.
On the other hand, Punjab-based mills are facing provincial government's ire and nine mills have so far been sealed. "We will not start crushing season until the federal government fixes a uniform sugarcane price for the three provinces as mills of Punjab and KP cannot compete with Sindh-based mills mostly owned by political elite of the province," he added.
In reply to a question, he said the Association does not support tax evaders, adding action should be taken against those mill owners who did not pay due tax. According to an official statement, PSMA said the sugar industry, operating in the provinces of the federating units, has incurred different costs of production. As a result, high sugarcane cost and lower than average recovery have severely affected the cash flows of the sugar industry operating in the provinces of Punjab and KP and has forced billions of rupees of defaults to the sugarcane farmers.
Last year, Sindh notified sugarcane price at Rs 172/40kg with a subsidy of Rs 12/40kg for payment to farmers. Beside this, the provincial government paid 50% of the export subsidy, ie, Rs 5. Punjab notified the sugarcane price at Rs 180/40kg and contributed Rs 5/- towards export subsidy. The provincial government of Khyber Pakhtunkhwa notified the sugarcane price at Rs 180/40kg and refused to contribute Rs 5 towards export subsidy despite the Economic Co-ordination Committee's binding decision.
The Association is of the view that instead of encouraging farmers to increase their yield with new variety sugarcane and modern sowing techniques, each year support price is increased that prompts subsidy from the Federal Government to export surplus sugar to absorb the high cost of sugarcane. At the same time, whenever sugar market prices stabilise, without considering that 70% of sugar has industrial consumption, sugar mills are forced to sell sugar in the domestic market below their cost of production. The members agreed that either the government ensure uniform sugarcane price or alternatively allow a free market mechanism to determine the sugarcane prices.
For the season 2012-2013, the government transferred the matter of sugar subsidy to TDAP for payment but it is still unable to disburse the subsidy, while the following year, SBP disbursed the subsidy smoothly. PSMA recommended to the government to transfer the subsidy from TDAP to SBP. Chairman PSMA Punjab Javed Kayani particularly expressed his grave concern about payments of sugarcane growers relating to last crushing season in Punjab which are still outstanding and mills faced coercive measures adopted by the Punjab government.
He was of the view that a default took place in view of sugarcane price disparity of 22/40 kg between Sindh and Punjab. On the one hand, Sind mills had an advantage of cost of production and secondly they continued to dump sugar in Punjab which eroded financial viability of Punjab sugar mills. He said he sought audition with prime minister, federal finance minister and chief minister of Punjab, requesting them to allow soft loans to mills in view of price differential but the request was not considered hence the resultant chaos in Punjab for non-payment of growers' dues.
He urged the government to fix a uniform price of sugarcane so that the next crushing season can start without any price controversy. "If price of sugarcane is regulated, the government can ensure sale price of sugar at a level commensurate with the sugarcane price announced. We should be given permission to export one million tons of sugar at the beginning of the season so that disposal of surplus takes place to facilitate timely payments to growers," he added.
He said that rebate of Rs 10 per kg is insufficient that is why PSMA was unable to export entire quantity of 650,000 tons of the last crushing campaign because mills were not getting a suitable export price to break even despite the fact Rs 10 per kg subsidy was given to the mills . He was of the view that subsidy should be raised to Rs 15/ per kg or as mills have appealed to Chief Minister Punjab to fix sugarcane price according to international market. "If for political expediency the price of sugarcane is fixed at a higher rate, the government should enable us to survive," he added.