Wholesale sugar price up by 11 percent

The wheat crisis across the country has been augmented with a sugar crisis as its wholesale price rose by 11 percent to Rs 75500 per ton from Rs 68000 per ton within a couple of days due to powerful speculators, well informed sources told Business Recorder.

This increase was witnessed days after meeting of Sugar Advisory Board (SAB) inter-provincial body, wherein the issue of sugar prices came under discussion. The meeting was presided over by Prime Minister's Advisor on Commerce, Industries and Production and Investment, Abdul Razak Dawood.

The government had fixed the rate of sugarcane at Rs 190 per 40 kg but in Central Punjab farmers were not ready to sell it at this price and were asking over 200 per 40 kg. The mill owners refused to purchase sugarcane at the higher rate.

Sources revealed to this correspondent that recovery in South Punjab is 11 or 12 percent which implies that the price of one kg of sugar is around Rs 52 or 53 per kg including taxes, and sale by the mills to producers of ethanol, baggasse and molasses with some also generating electricity.

The mills procure sugarcane at 45 days deferred payment, followed by one week and then net cash, the sources said, adding that as the initial 45 days have already passed the mills in the South are facing liquidity issues, which is why they are selling future stocks through speculators.

However, in Central Punjab recovery is 9-10 percent which implies wholesale Rs 60-62 per kg inclusive of all taxes.

At a recent meeting of Federal Cabinet, concern was raised over the suspension of sugarcane purchase by the sugar mills which is adversely affecting the farmers. It was pointed out that most members of All Pakistan Sugar Mills Association (PMSA) have colluded to close down their mills as purchase price jumped to Rs 225 per maund against official rate of Rs 190.

The members maintained that continued exploitation of farmers at the hands of powerful sugar mill owners is due to dichotomous pricing policy of sugarcane vis-à-vis cotton which does not have a support price. As a result, there is constant increase in cultivation of water intensive sugarcane crop in the cotton growing areas which is not desirable for a water stressed country like Pakistan.

The problem of farmers switching from cotton to sugarcane has been further aggravated due to anomalies in custom duty structure which provides sustentative protection to the local sugar producers against imports whereas a marginal import duty on cotton affects the domestic cotton price in face of cheaper imports.

In November 2019, retail price of sugar was Rs 70 per kg in November and has now reached Rs 80 per kg indicating substantial increase at a time when crushing season is at its peak.

The sources said, Abdul Razak Dawood communicated the concerns of cabinet members to the sugar millers during SAB meeting, urging them to reduce sugar prices but they stated that with current level of taxes it is not possible for them to reduce prices. He also urged the sugar mills to promptly pay sugarcane growers.