ECC facilitates millers, jacks up sugar prices

Dr Abdul Hafeez ShaikhISLAMABAD: Instead of passing on the impact of bumper sugar production to the consumers, the benign government decided to facilitate the wealthy sugar millers by allowing export of 100,000 tonnes of sugar that will help retain the sugar prices at the last year level of Rs70 per kg from the current prices of Rs45 per kg.

The decision was made by the Economic Coordination Committee (ECC) of the cabinet, chaired by Finance Minister Dr Abdul Hafeez Shaikh.ECC has already allowed procurement of 478,000 tonnes of sugar directly from the sugar millers. Pakistan is expected to produce a record five million tonnes of sugar this year as compared to average yields of three million tonnes per year. The procurement by public sector will help the government to maintain strategic sugar reserves for the current year.

An official source said the decision of ECC will only help the millers as allowing export will help them manipulate the market in the later part of the current year, when the demand for sugar picks up in the summer season. This will also be election time and official control over the cartel will be difficult to maintain.The source said that ECC also expressed concern over the delay in the payment of sugar millers by the Trading Corporation of Pakistan (TCP). Since Chairman TCP was not present in the meeting, ECC directed him to apprise the Cabinet Division and Finance Division on daily basis about the payments made to millers.

A statement issued after the meeting said ECC allowed export of 100,000 tonnes of sugar. The decision was taken after a detailed review of the sugar situation in the country. ECC had constituted a committee under the chairmanship of Minister for Textiles Makhdoom Shahabuddin, to examine the export of sugar and submit its recommendations. It recommended export of 200,000 tonnes of sugar on first come first basis purely through the private sector. ECC had a detailed discussion on sugar situation from the line ministries which maintained that the left over stocks from last year were 900,000 tonnes, and the current crop is expected to yield record production of around 4.5 to 5 million tonnes.

Taking annual consumption of 4.2 million tonnes, expected surplus would be around 1.5 million tonnes. However, it is important to mention that the Ministry of Industries has estimated last year that the domestic sugar consumption had declined to three million tonnes per annum due to the inflationary sugar prices. The government had imposed a ban of sugar exports in 2009.While allowing export of sugar, Finance Minister directed the concerned ministries to ensure that no single party alone benefited and modalities for the export be finalized in coordination with the State Bank of Pakistan.

ECC also discussed the request of the Pakistan Cotton Ginners Association already made to the Prime Minister for procuring 1 million bales of cotton lint at price of Rs6500 per bale. It was noted that only a small stock of cotton that is less than 10 per cent of overall production of 14 million bales was lying with the growers. It was decided that any intervention in such a situation was not prudent for cotton market as well as the growers. The meeting decided that the policy of free market should continue and let market forces define the prices of cotton in the country.

It may be mentioned here that the Karachi Cotton Association (KCA) and All Pakistan Textile Mills Association (APTMA) have also opposed the government intervention in the cotton price mechanism. The source said ECC deferred a summary of the Ministry of Water and Power seeking imposition of 16 per cent GST on the hydro electric power sector. He said that the committee was completely confused on the presentation made by the Power Ministry and ministers were not able to comprehend the need for imposition of levy. It was decided that the Chairman Water and Power Development Authority (WAPDA) would be called to brief the committee on the issue in the next meeting. – PT