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ISLAMABAD: The federal government has issued a new notification on July 30, 2021 through the Ministry of Industries and Production (MOI&P), which according to industry sources is a bid to bash the sugar industry yet again by fixing the price of sugar in a complete defiance to the restraining orders of the Peshawar High Court (PHC), and violating the criteria delineated by the Lahore High Court (LHC).

A meeting of the Pakistan Sugar Mills Association (PSMA) and the government took place on July 27, 2021 wherein, only the components relating to cost of production and the price of molasses as per the court order were required to be discussed in line with the costing adopted by the government of Punjab as per the MOI&P letter of 29th March, 2021.

The industry sources claimed that the MoI&P was trying to implement a premeditated price in a manner similar to solving a jigsaw puzzle to now arrive at an ex-mill price of Rs84.50 per kg and a retail price of Rs89.50 per kg.

The MOI&P, the sources say, has deviated from major components of the cost, which were earlier in agreement with the industry including the sugarcane recovery, which was adopted at 9.39 percent and has now been increased to 9.87 percent; cost of sugarcane reduced to Rs259 instead of Rs265; sale price of by-products i.e., bagasse and mud increased by Rs2.34/kg; the overheads of 9.24/kg based on working of export subsidy in 2017-18 by the Finance Division at Rs7.70/kg by incorporating 10 percent inflation for three years, whereas, it comes to Rs10.24/kg. They said if the same formula is applied thereby, cost would deliberately be reduced by Re1/kg in its working.

Fixing of sugar price: Ministry may face tough time at LHC

The viewpoint of the industry sources was to at least allow the same amount of Rs12.90/kg overheads, which were provided to the JIT by the MoI&P during the sugar price hike investigation as the government is not considering the financial, administrative, and selling costs.

The profit margin is also reduced from 15 percent to 13 percent as against the costing submitted to the LHC.

However, the MoI&P has accepted the price of molasses at Rs20,000 per ton but allegedly distorted all other numbers by giving unreasonable arguments in the speaking order to the dismay of the sugar industry. “Even ordinary business prudence demands that no business can sell its product at less than the cost of the product for such a long period of time in which more than half of production is sold”.

As per reports, during the crushing season, forced sales were made as FIRs were being registered for non-payment of sugarcane dues under the ordinances issued by the Punjab government.

The MoI&P in its notification of July 30, 2021, has further alleged that the sugar mills could not produce any document to counter the evidence put forth by the cane commissioner for the sugarcane price.

They said the PSMA was never asked to submit any data by the MoI&P and only a questionnaire was sent asking for various production-related components.

“It is very unfortunate that the secretary MOI&P being controller general of prices is perhaps unaware of the sugar industry dynamics being a seasonal operation or he is purportedly assigned to take such unrealistic decisions,” regretted the sources in sugar industry.

During the meeting held on July 27, the secretary MoI&P himself said that the commodity price should be fair.

As per Foodstuff Act, the definition of fair price is, “the expression fair price includes reasonable profit to seller and this element is to be taken into consideration in binding the price of any foodstuff. If the prices fixed under the said section are shown to have ceased to be ‘fair price’ they would no longer be in accord with the provision of that section and would in fact be violative thereof”. No steps have been followed to fulfil the requirement to arrive at a fair price as defined, lamented the sources.

‘Sugar industry facing destructive propaganda’

The instructions given to provinces to implement the prices under the Price Control and Prevention of Profiteering and Hoarding Act, 1977, are also reportedly illegal, they said. The price cannot be controlled by administrative measures”; rather it can only be regulated by the market mechanism and forces of demand and supply as per earlier advice of the MoI&P, they added.

The sugar industry “was of the view that the calculation of retail price of sugar 2020-21 is completely unrealistic and unworkable, and restricts the unfettered working of the industry.

According to the industry sources, fixation of unfair sugar rate by the MoI&P will only lead to disaster and eventual insolvency of the sugar sector in Punjab.

They said the PHC has already issued retaining orders in WP 3078-P/2021, whereas, the LHC has set criteria for prices and recent fixation of price is violating the criteria delineated by the LHC as per orders of July 23, 2021.

Copyright Business Recorder, 2021

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