LAHORE: Sugar millers have claimed that production and sale of sugar below its costs of production has become increasingly unviable and unsustainable for the sugar industry to continue the current crushing season without incurring huge losses and any such deterrent can compel a sugar mill to close abruptly for causes beyond its control.
The Pakistan Sugar Mills Association (PSMA) spokesman on Thursday alleged that the sugar industry of Pakistan had been under severe crisis for past many years and sugar manufacturers were constantly compelled to conduct business in an environment unprecedented in any other agro-based industry where the minimum fixed price of sugarcane was determined by provincial governments while the mills were forced to sell sugar at subdued rates to facilitate the consumers at an ex-mill price determined by market forces.
On the other hand, the mills were compelled to sell sugar below its production costs to ensure timely payments to growers and fulfill its working capital requirements.
Current sugar prices had been negatively impacted by last season’s carryover stocks due to minimal exports against surplus of one million metric tonnes valuing one billion dollars and unlawful restrictions imposed on inter-provincial movement of sugar to deficit provinces. Any intervention or support by the government to permit exports or purchase of surplus sugar stocks by Trading Corporation of Pakistan (TCP), to be kept as strategic reserves, was not forthcoming in spite of repeated requests.
The PSMA claimed sugarcane was a major raw material and cost component (about 80%) of sugar production. For crushing season 2023-24, its minimum support price fixed by the provincial government had an increase of 33 percent in Punjab and 41 percent in Sindh.
Sugar mills were already facing liquidity crunch due to squeeze on credit lines and increase in mark-up rates, wages, prices of imported chemicals, transportation costs and other high inflationary trends in last two years. Cost of production of sugar has increased manifold while currently the ex-mill price of sugar has gone down much below its cost of production.
Production and sale of sugar below its costs of production had increasingly become unviable and unsustainable for the sugar industry to continue the current crushing season without incurring huge losses and any such deterrent can compel a sugar mill to close abruptly for causes beyond its control.
“Sugar mills started crushing season on the due date and cane payments to the growers are being made regularly but the issues confronting the manufacturers are increasing with each passing day.
Sugar industry requests the government for an early rescue from its closing down in near future due to huge operational losses,“ spokesman of the Association concluded.
Copyright Business Recorder, 2023