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THE cultivation of cane, its conversion into crystals and the retail distribution of

the sugar continue to be a major problem area for the policy makers and the
consumers. The problems do not go away whether there is surplus or shortage of
cane or sugar.

With record cane production, anticipated big sugar surplus and falling sugar
prices, the industry is looking for a bail out from the government. And it seems
that the government may sooner or later oblige.

The industry and the consumer may gain from the move to do away with the
general sales tax (GST) of Rs3.15 per kilogramme of sugar as suggested by the
secretaries’ committee to overcome the liquidity problem of the sugar mill owners
and the public sector banks who have lent large sums to them.

And the secretaries committee also wants the Trading Corporation of Pakistan to
buy half a million tones more of sugar from the millers and raise the strategic
reserve to one million tones. The millers want the TCP to export the surplus half
a million tones so that it will not be locally distributed and the price brought down
in the market. The government has not yet agreed to this suggestion.

On the other hand, the Federal Board of Revenue (FBR) has been complaining
that the thriving sugar industry is not paying its full tax dues, particularly the GST.
At the same time, the secretaries’ committee is being urged to agree to withdraw
the sales tax so that the consumers can get cheap sugar.

The Sindh caretaker chief minister had a three-hour long meeting with the
stakeholders in the industry and resolved with their consent to fix the sugarcane
price at Rs63 for 40 kilogrammes. Earlier the Federal Agricultural Committee had
projected a crop of 54 million tones of cane.

As a result, the country is expected to have 5.36 million tones of sugar and a
surplus of over one million tons.

The sector is afflicted by low cane yield per acre and low sucrose content of
sugar. The FBR which is looking for larger tax resources complains that larger
sugar production and higher prices do not result in higher tax payment by the
industry. Hence it is becoming more vigilant in its approach to the industry with its
large stocks and huge loans.

The federal government collected Rs2.405 billion as GST on sugar during July-
September. This large tax revenue will vanish if the sales tax on sugar is
withdrawn.

Earlier, the Economic Coordination Committee at its meeting on November 29,


waived 20 per cent regulatory duty on the export of sugar but increased the
customs duty by 10 per cent -from 15 to 25 per cent --on sugar with the objective
of discouraging imports.

While the cane growers had a large number of supporters in the national and
provincial assemblies with political clout, the sugar mill owners had clout among
the federal and provincial ministers.

The last federal cabinet had several ministers who were sugar mill owners or
those linked with them. Hence there is a political tussle between the sugarcane
growers who demand high prices for their cane and the sugar mill owners who
want cane at low prices. This discord between them results in delaying the
harvesting of the cane and sowing of the wheat.

A major official effort has to be made every year for eliminating the discord on
sugarcane prices and late start of the crushing. In the middle are the banks who
have lent large sums to the sugar mills holding their stocks as collateral. So the
banks have their share of the problem.

The sugar industry may have got relief from the GST if a decision had been
taken increasing the POL prices but since that decision has been delayed till
after the elections, millers and consumers of sugar have to wait for the elections
to be over.

The cost of sugar production is so high, it cannot be exported even when the
surplus is large. World prices are usually low compared to domestic prices. If the
sugar has to be exported, heavy subsidies have to be paid which makes the
export uneconomic. So the TCP gets stuck up with large stocks which it can
neither export nor release for local sale without generous subsidy.

The movement of the cane from the field and sugar from the mills to the
consumers is not smooth and free from hassles for the country to gain out of its
real assets.

The area of the sugarcane cultivation cannot be increased without encroaching


on the land for other crops. Hence the effort must now be to increase the cane
yield per acre and raise the sucrose content. Intensive research is essential to
improve cane productivity and upgrading the sugar industry.