“This decision indicates that the federal government will provide the subsidy for 250,000 tons of sugar and the same quantity will be subsidised by provinces at the rate of Rs13 per kg,” said a senior official of the Ministry of Industries and Production. The total subsidy approved stands at Rs6.5 billion.
Though the Ministry of Commerce, in its summary, sought subsidy on the export of 250,000 tons, but to the surprise of many the Economic Coordination Committee (ECC) ignored the proposal earlier this month and allowed export of 500,000 tons, the official said.
In fact, he said, the ECC met the demand of the Pakistan Sugar Mills Association that wanted to sell 500,000 tons to overseas buyers. In the meeting, Planning and Development Minister Ahsan Iqbal suggested that sugar mills should spend 10% of the subsidy on research and development activities.
Earlier, the ECC had given permission for export of 650,000 tons with Rs10 per kg in cash support, but 542,076 tons could be exported. As a result, the ECC increased the subsidy to Rs13 per kg for the remaining quantity, which would be included in the 500,000 tons allowed for export this month.
It was suggested that the cash support was not sufficient for the sugar barons to compete effectively in the international market because of which they failed to achieve the export target.
According to representatives of the Ministry of Industries and Production, sugar production was expected to be 5.13 million tons in the 2016 season compared to estimated consumption of 4.8 million tons.
After adding 300,000 tons left from the 2015 season, a surplus of around 630,000 tons was expected to be available for export in the new season.
They pointed out that a number of tenders were floated by the Utility Stores Corporation (USC), but no sugar mill was willing to commit supplies, making it difficult for the USC to play the role of a price stabilising agent for domestic consumers.
Therefore, the surplus quantity could be provided to the USC at international market prices and the rate difference should be met by the federal government.
However, the ECC brushed aside concerns of the ministries of industries and commerce and allowed export of 500,000 tons with 50% subsidy to be borne by provinces.
It said only those mills would be allowed to make exports which had cleared outstanding bills of sugarcane farmers up to the last season and had started crushing at full scale in the new season.
It approved cash support covering the incidental and freight charges at Rs13 per kg, which would be equally shared by the federal and respective provincial government. The minimum price for sugar export to Afghanistan and Central Asia was set at $450 per ton.
News source: The Express Tribune