Fears about im­port of In­dian sugar

The Pak Banker - - 4editorial - Nasir Ja­mal

PAK­ISTAN'S sugar pro­duc­ers dread the day In­dia lifts re­stric­tions on the sweet­ener's ex­port. In­dian traders are go­ing to flood Pak­istan with their sugar the day their govern­ment al­lows ex­port un­less Is­lam­abad puts it on the neg­a­tive list, say the sugar fac­tory own­ers. "If that hap­pens, it would be a night­mare for our do­mes­tic in­dus­try and grow­ers" a miller, who re­quested anonymity, told Dawn last week.

"The In­dian sugar is cheaper than ours be­cause the millers there get sugar cane at a much lower price than us. Apart from price ad­van­tage, they also have freight and time ad­van­tage when it comes to trad­ing with Pak­istan," he said.

The Pak­istan Sugar Mills As­so­ci­a­tion (PSMA) has called upon the govern­ment to put curbs on pos­si­ble sugar im­ports from In­dia to pro­tect the do­mes­tic in­dus­try, grow­ers and jobs. PSMA chair­man Javed Kayani has re­cently stated that sugar im­ports from In­dia would amount to "sub­si­dis­ing" In­dian farm­ers at the ex­pense of our own cane grow­ers.

In­dia is ex­pected to make a de­ci­sion on the ex­por­ta­tion of sugar to­wards the end of this month or the be­fore the mid­dle of next month. The In­dian govern­ment says it will take a de­ci­sion on whether or not to al­low sugar ex­ports af­ter as­cer­tain­ing the ex­act do­mes­tic out­put.

In­dian sugar out­put is es­ti­mated to soar to 25.5 mil­lion tonnes dur­ing the cur­rent har­vest from last year's 18.8 mil­lion tonnes. Ac­cord­ing to the In­dian Sugar Mills As­so­ci­a­tion es­ti­mates, sugar ex­ports could to­tal two mil­lion tonnes for the cur­rent sea­son to the end of Septem­ber.

In­dian pro­duc­ers have al­ready raised their prices in view of pos­si­ble lift­ing of re­stric­tions on the prod­uct's ex­ports, ac­cord­ing to a Reuter re­port.

On the other hand, it is go­ing to be an­other year of sugar short­ages in Pak­istan - mainly be­cause of the dev­as­tat­ing sum­mer floods that washed away stand­ing crops on a vast area across the coun­try.

The in­dus­try sources ex­pect fresh sugar out­put to fluc­tu­ate be­tween 3.7 mil­lion tonnes to 3.8 mil­lion tonnes against a do­mes­tic re­quire­ment of 4.2 mil­lion tonnes. That will pro­vide am­ple op­por­tu­nity to the traders to bring in the prod­uct from In­dia to make some ex­tra money" at the ex­pense of the lo­cal pro­duc­ers and sugar cane grow­ers, the millers be­lieve.

Though most mills in Pun­jab and Sindh have started, millers ar­gue that the pos­si­ble in­flux of the com­mod­ity from In­dia would make it dif­fi­cult for the in­dus­try to re­cover its costs, which have been soar­ing in the re­cent days on the back of ris­ing cane prices.

Re­ports from var­i­ous sugar cane grow­ing ar­eas of Pun­jab sug­gest that grow­ers have not be­gun full-fledged har­vest­ing of their crop.

The fac­tory own­ers con­tend that the grow­ers were try­ing to raise their prices by de­lay­ing har­vest. "The cane prices have been raised to above Rs200 per 40kg in parts of Pun­jab against the govern­ment-fixed min­i­mum rate of Rs125 per 40kg," a PSMA of­fi­cial told this re­porter.

He said, the mills which had com­menced pro­duc­tion were op­er­at­ing on less than half of their ca­pac­ity be­cause of short cane sup­ply in the mar­ket.

Ac­cord­ing to him, the higher cane prices will even­tu­ally trans­late into the sweet­ener's re­tail prices.

At the ex­ist­ing cane prices, the millers' cost of pro­duc­tion will spike sub­stan­tially and it will not be fea­si­ble for them to sell their prod­uct be­low Rs70-72 per kilo, he ar­gued. The farm­ers, how­ever, in­sist that the har­vest had not picked mo­men­tum be­cause many mills are yet to start crush­ing. Ijaz Ahmed Rao, a grower from Ba­hawal­nagr, said early last week that the mills in his area were yet to com­mence crush­ing. But he ad­mit­ted that sugar cane sup­ply was short and prices had been raised.

While the slow har­vest may have been one fac­tor im­ped­ing start of full-fledged crush­ing in Pun­jab, the pro­vin­cial govern­ment's pol­icy to con­trol the sweet­ener's re­tail prices had con­trib­uted sig­nif­i­cantly to slower crush­ing this year.

The millers were re­luc­tant to buy cane from the farm­ers at the raised prices be­cause they did not know if they would be sell their prod­uct at a higher price to re­cover their costs and prof­its on ac­count of the pro­vin­cial govern­ment's pol­icy to fix its re­tail prices.

The pro­vin­cial con­trol on sugar prices has since been lifted and the har­vest is ex­pected to pick mo­men­tum shortly af­ter Ashura, say the millers.

A sugar dealer from La­hore, As­ghar Butt, said the com­mod­ity's sup­ply in the mar­ket had suf­fi­ciently in­creased in the re­cent days with the start of the fresh har­vest.

"The sup­ply has ac­tu­ally sur­passed con­sump­tion be­cause the hoard­ers who had hid the sweet­ener dur­ing late Oc­to­ber and early Novem­ber had also brought their stocks in the mar­ket af­ter prices showed a de­clin­ing trend," he claimed.

The im­prove­ment in the sup­ply and de­mand bal­ance, he said, had put pres­sure on sugar prices and ex-mill rate had dropped in the last one week to Rs69 per kilo from close to Rs80. "Our prices are al­ready un­der pres­sure and we are strug­gling to re­cover our costs," says a miller.

"In these cir­cum­stances the pos­si­ble im­port of In­dian sugar could bring more pres­sure on the prices, mak­ing it even more dif­fi­cult for us to re­cover our costs.

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