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ISLAMABAD: The federal cabinet was presented a new policy on sugar reforms, envisaging mandatory registration of brokers, dealers, and wholesalers of sugar with the National Tax Number (NTN) and sales tax registration number (STRN) linked to their bank accounts with mandatory registration of godown and automated online inventory management system.

Minister for Information and Broadcasting Fawad Chaudhary informed the media that the cabinet was submitted a comprehensive report with regard to new policy of sugar reform. The minister said before taking final decision, the report would be issued for public debate for three weeks.

A copy of the report available with Business Recorder noted that under the new policy, the State Bank of Pakistan (SBP), the Federal Board of Revenue (FBR), and the provincial governments would constitute joint inspection teams of stakeholders including the concerned bank to verify on pledged stock after every three months.

In case, any misappropriation/ shortage came to notice, the matter may be referred to the Federal Investigation Agency (FIA) for initiating criminal action against the defaulters. It has been recommended that the sales tax should be charged at the actual sale price of sugar through an amended SRO by the FBR.

The policy also focused on stoppage of tax evasion, Benami sales, undocumented transactions, and other malpractices prevalent in the sugar industry through implementation of the Track and Trace system.

There should be mandatory registration of brokers, sugar dealers, wholesalers with NTN and STRN linked to their bank accounts with mandatory registration of godown and automated online inventory management system.

Don’t do as you please, reform please!

To handle the forward contracts/satta in sugar, the government should bring contracts under Pakistan Mercantile Exchange (PMEX) and mills to provide the forward contracts reports on a daily basis, specifying the quantity of sugar, its booking price and maximum lifting fortnight by the traders’ time be 15 days.

The inspection regime should be strengthened in order to ensure that no sugar remains un-lifted after the expiry of the forward contract. New legislation will deal specifically with Satta (speculation), whether physical or online, on sugar and other commodities. These forward contracts should not be hidden.

In order to report accurate data of sugar to the federal government, the FBR should develop a digital dashboard of stocks, wherein, stocks data of provincial cane commissioners may also be shared on a regular basis with the Ministry of Industries and Production.

Other areas of recommendations included cultivation/ purchase of sugarcane crop, crushing of sugarcane/ manufacturing of sugar, storage and sales by sugar mills, wholesale and retail, as well as, demand compression and exports/ imports of sugar.

The cultivation/ purchase of sugarcane crop, provincial government required abolition of legislation (if any) regarding zoning of crops, and leaving the choice of what to grow to farmers’/market forces (at present, there are no zoning laws in Pakistan on zoning of crops).

As per new policy, the government would no longer regulate indicative sugarcane prices and ex-factory sugar prices would be deregulated with effect from crushing season 2023 and in this regard, amendment of sugar factories Control Act Provincial Governments, 1950, to abolish clause dealing with indicative price by the provincial governments. However, 2-3 years’ time will be given to farmers to make adjustments.

The pricing of sugarcane should be according to the sucrose content. Provincial governments will provide latest equipment/laboratories to the cane commissioners for testing of sucrose content and implementation of new pricing mechanism.

There should be adequate pricing of water on volumetric basis to avert market failures. This step will remove externalities and lead to incorporation of actual cost of production of sugarcane. Legislation would be required by the provincial governments (agricultural and provincial governments Irrigation Departments) on supply of water to the cropping areas.

There should be free choice of area for crop cultivation for farmers, as well as, for private sector for setting up sugar mills and action to this effect would be required by the provincial governments’ abolition of sugar factories establishment and Provincial Governments Enlargement Act, 1966, it stated. The government should invest in efforts to improve seed technology and study beet sugar cultivation.

The Ministry of National Food Security and Research (MNFS&R)/ provincial governments may initiate programmes for seed improvement for enhancing sucrose content and increasing per hectare yields, as well as, consuming less water.

Govt urged to formulate 'realistic' long-term sugar policy

Possibility of beet sugar to be explored, the new policy recommended. SUPARCO and provincial crop reporting departments need to collaborate and employ modern techniques to report accurate data about sugarcane crop production to Federal Government.

The MNFS&R will coordinate with Ministry of Industries and Production and will communicate advice to MNFS&R. Provision of low-cost financing for farmers for purchase of inputs and financial intervention to be devised by the SBP and the Ministry of Finance.

There would be amendments by the provinces in Sugar Factors Act 1950 for averting late crushing of sugarcane. The amendment in the law would enable the provincial governments to fix crushing date of sugarcane (ideal legislation is of Sindh in this regard). Enhancing financial penalties for late crushing is included in the Act.

These penalties may include Rs5million fine and 12 months’ imprisonment. Storage and sales by the sugar mills for adequate enforcement of registration of Godowns Act, the strict implementation by the provincial government will ensure that no hoarding is possible.

In order to curb mismanagement of pledged stocks by mill owners, the State Bank of Pakistan should issue advisory to the commercial banks to inspect their pledged sugar stocks, and to verify their presence with the collaboration of the FBR and the cane commissioners.

Copyright Business Recorder, 2021

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