ECC set to consider certain benefits for sugar mills
December 11, 2012
The Eco-nomic Co-ordination Committee (ECC) of the Cabinet scheduled to meet on Tuesday (today) is all set to consider certain financial benefits for sugar mills in the shape of rebate on exports up to Rs 6 per kg on 0.5 million tons and procurement of 0.35 million tons through Trading Corporation of Pakistan (TCP), sources close to Secretary Industries told Business Recorder.
Presided over by Finance Minister Dr Abdul Hafeez Shaikh, the ECC will consider three summaries on sugar tailored by the Ministry of Commerce, two of which have been made part of the agenda as additional items. Interestingly, the three summaries were prepared on the same date which is December 7, 2012, the sources added. According to the summary number one titled “mechanism for export of sugar.” The Commerce Ministry moved a summary for the ECC for export of 0.2 million tons of sugar in addition to allowing 0.2 million tons of export through ECC decision of October 3, 2012. The ECC in its decision on November 22, 2012 constituted a committee comprising Kamal Majidullah, Special Assistant to the Prime Minister on Water Resources (Convenor), and Secretary Commerce and Secretary Industries to devise a mechanism for timely export of sugar and submit its report in the next ECC meeting.
Pursuant to the decision of the ECC, the committee met on November 30, 2012 and unanimously agreed to the following recommendation for submission to the ECC: (i) the contracts made in pursuance of the ECC decision of January and May 2012 against which the sugar has not yet been exported or partially exported be immediately cancelled; (ii) contracts made in pursuance of the ECC decision of October 2012 shall be cancelled if sugar is not exported within 15 days; and (iii) the quantity of sugar against the cancelled contracts shall be allowed export against minimum of 10 percent advance payment of contract or irrevocable letter of credit and shipped within 60 days from the date of approval of the State Bank of Pakistan (SBP).
The second summary is titled “export of 0.5 million tons sugar which is in addition to already allowed 0.7 million tons taken in January, May, October and November 2012. According to the summary, the meeting of Sugar Advisory Board (SAB) was held on November 15, 2012 in the Ministry of Industries to review the actual situation on sugar stocks prices, export statistics and the estimated sugar production.
In the meeting all the stakeholders including the representatives of provinces and sugar industry agreed that current stocks of sugar in the country are 1.5 million tons. A total quantity of 4.7 million tons would be produced in sugar season 2012-13. The representative of the Pakistan Sugar Mills Association forecast that a total quantity of 5.9 million tons is expected to be available for 2012-13 against annual domestic consumption of 4.2 million tons.
Consequent to the situation placed before the SAB meeting there would be around 1.7 to 1.9 million tons surplus sugar available in the country in 2012-13. Considering the statistics of PSMA credible, the SAB recommended in the meeting that domestic sugar mills may further be allowed to export 0.5 million tons of sugar during the season of 2012-13. Accordingly, Ministry of Industries in its office memorandum of December 6, 2012 suggested that in addition to earlier approval of export of 0.7 million tons of sugar, the issue for further export of 0.5 million tons may be taken up by the Ministry of Commerce.
Commerce Ministry, in its second summary has recommended that keeping in view the present stock of sugar and expected bumper crop in 2012-13, the sugar mills may further be allowed export of 0.5 million tons against irrevocable letter of credit or contract with 10 per cent advance payment to be shipped in 90 days of the registration with the SBP in addition to already allowed export of 0.7 million tons of sugar vide ECC decisions.
According to the third tailored summary the ECC in its decision of November 30, 2007 decided that the upper limit of the strategic reserves of the sugar kept by TCP should be enhanced from its current level of 0.4 to 0.5 million tons. Furthermore, para 4.14 of National Sugar Policy, 2009-10 stipulates that TCP shall maintain strategic reserves of 0.5 million tons of white sugar at any point of time. These will be replenished through domestic or international procurement as deemed appropriate considering competitive price and local demand.
The Commerce Ministry further stated that the SAB meeting was held on November 2012 in Ministry of Industries to review the actual situation of sugar stocks, prices, export statistics and the estimated sugar production. PSMA gave its projections about sugar production in 2012-13 and current available stocks. Figures are mentioned above in the story.
The Commerce Ministry claims that the meeting decided that TCP may procure 0.5 million tons of sugar from domestic mills to maintain strategic reserves. Moreover, limit of the strategic reserves maintained by TCP may be enhanced to one million tons. This claim, however, is not confirmed in minutes available with this scribe.
The summary further claims that Prime Minister”s Secretariat has also desired that the proposals including purchase of 0.5 million tons of sugar by TCP put forward by PSMA be evaluated and, accordingly, recommendations, if any, be formulated for placement before ECC.
The proposal of PSMA was examined in consultation with TCP. During 2012, TCP has locally procured 0.687 million tons of sugar out of which delivery orders for 0.509069 million tons have already been issued to Utility Stores Corporations(USC) and other agencies up till November, 2012 leaving a balance of 0.177931 million tons for allocation. The TCP on average is issuing delivery order of 50,000 tons per month on demand of USC.
Consequent to the annual average allocation of sugar to use the remaining unallocated stocks with TCP is likely to exhaust by March 2013. TCP has opined that it would be in the fitness of things if TCP”s present stocks are replenished during the current crushing season at the earliest. This would not only help getting good procurement price but would also avert any likelihood of shortage/crises. In view of the foregoing, the Commerce Ministry has proposed that TCP may be allowed to procure and maintain a strategic reserve of 0.5 million tons of sugar by purchasing 0.330 million tons of domestic sugar during 2012-13 season.