Sugar mills to move Supreme Court

LAHORE: Sugar mills will challenge the Lahore High Court decision to fix Rs36 a kilo as the ex-factory and Rs40 as retail price of the sweetener in Punjab.

Talking to Dawn on Thursday, Pakistan Sugar Mills Association (Punjab) Chairman Javed Kayani said the millers did not accept the decision because it had been given without hearing the producers and their representative body.

‘The ex-factory rate given by the court does not even meet our cost of sugarcane. We will challenge the decision,’ he said. But he did not say as to when they plan to appeal.

The federal government has recently fixed Rs45 per kilo as the ex-factory price of sugar across the country. The product is available at Rs47 a kilo in the market in Punjab.

Apart from that, the federal government is selling the sweetener at subsidised rate of Rs38 a kilo through its network of utility stores and the Punjab for Rs40 per kilo in Ramazan bazaars.

Industry analysts believe that the court direction to the Punjab government to take measures to reduce the retail sugar prices across the province may trigger fresh shortages of the sweetener in the market.

‘The decision is likely to spark yet another crisis in the market because the sugar millers will not be prepared to sell their product at the rate fixed by the court,’ a sugar industry analyst, who asked not to be named, told this reporter.

‘Apparently, there is no mechanism to bring down the sugar prices in the domestic market because of its rising global prices. There is every possibility of fresh shortages in the market if the government uses force to implement the court decision,’ he said.

The analyst said the federal government had fixed Rs45 a kilo as the ex-factory rate of sugar in the domestic market in view of the global shortages which have sent the sweetener’s prices skyrocketing all over the world.

‘The federal government has instructed the Trading Corporation of Pakistan to import 100,000 ton sugar, which will cost the consumers Rs65 a kilo unless it is subsidised. In view of the high import price, the present domestic prices look quite reasonable,’ the analyst said.

The government is estimated to suffer a loss of around Rs2 billion on the imported 100,000 tonnes of sugar due to the differential in the prices of imported and domestic sugar.

The price of raw sugar has increased to its highest level worldwide since 1981 on the back of its growing demand in Brazil for ethanol for fuel and a sharp fall in production in India, the world's largest sugar consumer.

A sugar miller, who requested anonymity, criticised the government intervention in the market to curtail the sugar prices. ‘Whenever sugar prices go up successive governments intervene in the market in the name of protecting the interests of consumers. But no government has ever intervened to ensure that the mills get sugarcane from the farmers at the government fixed prices, which is the primary factor behind pushing up our cost of production and consequently the retail rates of the product,’ he said.

He said the mills were forced to pay a lot more than the government fixed support price of sugarcane this year because of lower output, which increased their production cost manifold.

‘But this factor is never taken into account when the sugar prices are fixed by the government,’ he regretted.

The analyst noted that the fixation of prices of any commodity by governments never produced desirable results.

‘It always distorts the market and disturbs the supply chain. We have been witness to many such crises in the recent past. If the government wants to help the poor it should do so by giving direct, targeted subsidy to them,’ he said.

Source:dawn