Fears about import of Indian sugar
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.