The federal cabinet has approved a summary to export 100,000 metric tons more sugar - a move that came on the heels of Prime Minister Shehbaz Sharif’s earlier refusal to endorse more exports and Punjab’s decision to transfer two officials dealing with the sugar issue.
The cabinet approved the summary through circulation on September 25 – the day the prime minister was in New York, showed the official documents. The summary was not tabled during the regular cabinet meeting and instead the ministers’ endorsement was obtained through electronic mails.
The approval of the summaries through circulation is one of the methods available under the Rules of Business of 1973.
The cabinet ratified the decision of its Economic Coordination Committee (ECC) of the cabinet, which on September 20th had cleared the summary of the Ministry of Industries to give permission for export of 100,000 metric tons of sugar. Earlier, the ECC had already authorised the export of 150,000 metric tonnes of sugar.
Last month, the ECC had given approval for the 100,000 metric tons of sugar but the summary was shot down by the Prime Minister. Shehbaz Sharif had refused to ratify the ECC’s decision, instructing that the summary be reconsidered in light of retail prices, available stocks, and domestic demand until the new crushing season.
Previously, the Prime Minister had taken an exception to the ECC’s decision to delink the export permission from the movement in the domestic retail prices of sugar. The ECC again linked the permission with local market prices in its September 20th decision.
Last month, the government estimated total sugar stocks at 4.8 million metric tonnes. The ECC believed that after the export, 704,000 metric tonnes of sugar will still be available at the start of the new crushing season. The Cane Commissioner of Punjab had confirmed that the province will have a leftover stock of 89,000 metric tonnes once strategic reserves and consumption are accounted for.
However, these commitments were given by the new Cane Commissioner of Punjab and new Food Secretary Punjab.
The government of Punjab on August 29th transferred Moazzam Iqbal Sipra and appointed Ehsan Bhutta as new food secretary. Likewise, on the same day, the Punjab government transferred the cane commissioner Abdul Rauf and brought in Shoaib Khan Jadoon.
There has been surplus sugar available in the market but the only question remains how much of it is disclosed in the books and how much is off the books to evade sales tax and income tax, said an owner of a Punjab-based sugar mill while speaking on the condition of anonymity.
The sugar export decisions are taken on the basis of officially verifiable stocks, which are always less than the total available stocks due to under reporting, he added.
According to the new tax transformation plan, which the Prime Minister approved a few days ago, there has been massive under-reporting of production in the sugar, cement and textile sectors.
At the time of giving first permission to export 150,000 metric tons of sugar a few months ago, the cabinet had linked the export permission with keeping the local market prices stable at RS145 per kilogram. However, last week the ECC was informed that the retail prices had exceeded Rs145 per kilogram, the ex-mill price remained below the threshold determined by the ECC.
The federal cabinet has again linked the export permission with the regular monitoring of the local prices. The retail market benchmark threshold is Rs145.13 per kilogram. The Pakistan Bureau of Statistics data showed that the average sugar prices remained at Rs139.5 per kilogram this week much below the threshold.
The sugar export permission file moved at a lightning speed, thanks to the connections of the sugar millers in the power corridors. The federal cabinet gave permission on Wednesday. Next day on Thursday, the Ministry of Commerce issued the instructions to implement the cabinet decision. On Friday, the new Punjab cane commissioner distributed the quota among 41 mills.
The government has distributed the export quota among the three provinces producing sugar.
Out of the 100,000 metric tons, Punjab’s share is 64,000 metric tons. The new cane commissioner approved a 4,357 metric ton quota for Hamza Sugar Mills. Jahangir Khan Tareen’s JDW sugar Mills got a 7,189 metric tons quota based on their total sugarcane crushing. The quotas are fairly distributed on the basis of the sugarcane crushing by each mill.
The sugar millers often win favours and get their desires implemented due to their connections. The government has also implemented a controversial decision of the power sector regulator and paid the first tranche of Rs8.2 billion to power plants owned by five sugar millers on account of imported coal cost while they actually burnt sugarcane’s byproduct for generating electricity.
In the first phase, the government paid Rs840.3 million to Chanar Energy, Rs1.48 billion to Chiniot Power, Rs1.42 billion to Hamza Sugar Mills, Rs4.1 billion to two units of JDW and Rs399.3 million to Rahim Yar Khan Mills, according to the documents. Almoiz and Thal Industries did not receive any payment in the first phase.
