Different cane prices: sugar millers of KP, Punjab furious at federal government

Sugar millers of Punjab and KPK are reportedly furious at the federal government for extending billions of rupees of financial benefits to Sindh-based sugar mills by fixing a different price for sugarcane and have urged National Accountability Bureau (NAB) to take notice of what they term undue benefits to Sindh-based mills.
"We are at a complete disadvantage as compared to Sindh. Our sugarcane price was fixed at 180 per 40 kg whereas Sindh-based mills were paid Rs 160 per 40 kg. Sindh-based mills earned billions of rupees as their production cost was Rs 50 per kg whereas production cost for Punjab and KPP was Rs 60 per kg. Nine mills of Punjab have been sealed and three are bankrupt," said one sugar mill owner.
Pakistan Sugar Mills Association's stormy General Body meeting is expected to be held on October 25, 2015 wherein this issue will come under discussion. Punjab-based sugar millers argue that the federal government should impose duty on sugar which is coming in Punjab and KPK from Sindh to provide a level playing field. Sugar stock with the mills is around 0.7 million tons in addition to 0.3 million tons with the stockists which implies mills will not start crushing until existing stocks are sold, he said, adding that mills are not in a position to make payment to growers if available stocks are not sold. In reply to a question, he said, Trade Development Authority of Pakistan (TDAP) is sitting on Rs 2.1 billion subsidy for the last two years.
He suggested that the government should fix retail price of sugar across the country after calculating the expenses and subsidy that should be paid directly to growers. PSMA also drew the attention of Prime Minister, Nawaz Sharif towards the sugarcane price disparity "for the first time in the history of sugar industry. " "Since sugar is sold across provinces without any restrictions, provinces notify uniform sugarcane rates. However, contrary to this practice, crushing season 2014-2015 witnessed an anomaly in sugarcane support price, "said PSMA.
According to a letter written to Prime Minister, Sindh notified sugarcane price @ 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/ whereas Punjab notified the sugarcane price @ Rs 180/40kg and contributed Rs 5/- towards export subsidy. Khyber Pakhtunkhawa notified the sugarcane price @ Rs 180/40kg and refused to contribute Rs 5/- towards export subsidy despite the Economic Co-ordination Committee's binding decision.
The letter further states that sugar industry operating in the provinces of the federating units have incurred different cost 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 Khyber Pakhtunkhawa and has forced billions of rupees of defaults to sugarcane farmers.
"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 letter continued. PSMA has requested the Prime Minister to convene a meeting of all the Chief Ministers for ensuring a uniform sugarcane price or alternatively allow the free market mechanism to determine the sugarcane prices.