Sugar Industry Prepares for New Crushing Season Amid Export Controversy

Introduction

The Pakistan Sugar Mills Association (PSMA) recently announced that the new sugarcane crushing season will begin on November 21, 2024. This decision comes despite the government’s recent approval to export an additional 500,000 metric tons of sugar. The PSMA assures that even after these exports, there will be sufficient sugar stocks to meet domestic demand for more than a month.

Start of Crushing Season and Export Agreement

According to the PSMA spokesperson, the sugar mills have committed to beginning the crushing season on November 21 as part of an agreement with the government. This arrangement was contingent on the export of 500,000 metric tons of sugar and further potential exports based on the stock assessment conducted on November 1.

The spokesperson added that the first ten days of sugar production in November will be added to the available stocks, ensuring a smoother transition during this season.

Government’s Controversial Export Decision

The federal government’s decision to allow additional sugar exports has sparked some controversy. The Express Tribune reported discrepancies between stock figures and consumption estimates provided in two different summaries, leading to the approval of additional exports. The first summary, dated September 18, and another from October 10, showed a 20% variation in consumption data, which raised concerns about manipulated figures.

Federal Minister for Industries, Rana Tanveer Hussain, confirmed that the PSMA had pledged to start the crushing season in exchange for the export permission. However, this agreement was subject to additional conditions that include further stock assessments.

Financial Impact and Stock Surplus

The PSMA highlighted that the delay in export permissions had severely impacted the industry’s liquidity, resulting in some mills being unable to pay sugarcane growers on time. The industry had accumulated unsold stock worth approximately Rs 300 billion by the end of September 2024, creating significant financial strain. These stocks, pledged with banks, have made it difficult for the mills to secure fresh credit for the upcoming crushing season.

Additionally, it was noted that half of the available sugar had been sold below its production cost, leading to substantial losses for the industry.

Price Discrepancies and Retail Price Recommendations

With an oversupply of sugar, prices remained between Rs120 and Rs125 per kg, well below the agreed ex-mill price of Rs140 per kg. Despite this, official documents from the commerce ministry suggested lowering the retail benchmark price from Rs145 to Rs137.51 per kg. This recommendation was opposed by the industries ministry, which argued that the current prices were “abnormally low.”

Measures to Curb Sugar Smuggling

PSMA commended the federal government’s efforts to prevent sugar smuggling, which had been a major issue before September 2023. These actions resulted in surplus sugar being available for export, helping generate valuable foreign exchange for the country rather than benefiting smugglers.

Conclusion

The start of the sugarcane crushing season brings both opportunities and challenges for Pakistan’s sugar industry. While the export approvals offer much-needed relief for the sector, concerns remain over stock figures, financial liquidity, and the impact on domestic sugar prices. As the situation unfolds, the industry’s ability to balance exports with domestic demand will be crucial in maintaining stability.

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