The government on Monday set a new precedent by approving an enormous Rs 13 per kilogram export subsidy for sugar exports of up to 500,000 tonnes, which would cost Rs 7 billion to the national exchequer.
An official announcement of the Ministry of Finance said that the Economic Coordination Committee of the Cabinet (ECC) in its meeting chaired by Finance Minister Ishaq Dar accorded approval for export of 500,000 metric tonnes of sugar in a phased manner by March 31 2016.
It was decided by ECC that Rs 13 per kg would be allowed as partial support for incidentals and freight for the export of this quantity and only those mills will be allowed to export which have cleared the outstanding dues of the farmers up to last season and have started crushing on full capacity. The cash support and the inland transportation support will be shared equally by the federal government and the respective provincial governments.
An official source said that the ECC had failed to get firm commitment from the sugar mill owners that they would be paying farmers on time and as per the government notified support prices for the sugarcane.
Sugar mill subsidies have been criticised in the past as important political families like that of Asif Zardari and Zulfiqar Mirza in Sindh and Mian Nawaz Sharif and Mian Shahbaz Sharif, Humayun Akhtar Khan and Haroon Akhtar Khan and Jehangir Khan Tareen in Punjab own sugar mills.
Pakistan has an estimated domestic demand of 4.8 million tonnes per annum calculated at an average of 0.4 million tonnes per month. The sugar production has hovered at around 4 to 4.5 million tonnes in the past. The fall in commodity prices has resulted in an abnormal increase in sugarcane production resulting in increase in sugar production to over 5.5 million tonnes per annum.
The sugar mills have failed to take advantage of the situation by increasing their exports. The cannot export sugar due to higher cost of production but have retained their hold over the domestic market with help from the government.
According to ECC’s announcement, in the first phase, up to 200,000 tonnes of sugar will be allowed to be exported by December 31, 2015. By the end of January, a total of 350,000 tonnes will be allowed, while the cut-off date for the total volume of 500,000 tonnes will be March 31, 2016. The unutilised quotas for sugar exports allowed previously will stand cancelled.
The Nawaz government during its second tenure in 1997-99 set a precedent by allowing Rs 4 per kilogram rebate on sugar exports to neighbouring India. The wholesale sugar price in the country is around Rs 60 per kg as compared to Rs 40 per kg price in the international market. The Finance Ministry has already protected the sugar millers by hiking the duties on sugar imports.
The ECC decided that the Special Committee constituted by the prime minister chaired by the minister for commerce and comprising secretaries of commerce, national food security & research, industries and production and additional secretary finance would meet in the first week of every month to review the sugar stock/export situation. The cash support will be disbursed through the SBP.
ECC also decided that the minimum price for the export of sugar to Afghanistan and the Central Asian States may be fixed at $450 per metric ton.
ECC was also briefed by the finance secretary on the current economic situation in the country. He informed the forum that average inflation in July-November 2015-16 stood at 1.86 per cent.
Finance secretary also informed the meeting that the wheat stocks of the country as of December 2015 stand at 7.88 million tonnes and the total stocks of sugar were 1.36 million tons as of October 28, 2015. The stock of various POL products averaged 13 days on December 4, 2015. The meeting was informed that the growth of LSM was recorded at 3.9 per cent from July to September this year as compared to the same period last year.
GAS POWER PLANTS:
Federal finance minister also chaired a meeting on Monday to review the financial requirements of upcoming gas based power plants.
Water and Power Secretary and PPIB MD Yonus Dagha gave a presentation to the participants of the meeting, putting forth timelines for completion of different formalities in regard to the proposed projects. The meeting was briefed regarding the total gas requirement for the up-coming plants. The Ministry of Petroleum and Natural Resources informed the meeting that sufficient gas supply for these plants would be ensured.
The finance minister directed Ministries of Water and Power and Petroleum and Natural Resources to keep close coordination for achieving speedy progress on the proposed power plants. He also said that transparency and efficiency should be ensured while undertaking these projects. He gave instructions to convene regular meetings for seeking update on progress of work.
Minister of Petroleum and Natural Resources Shahid Khaqan Abbasi and Senior officials of the Ministries of Finance, Water and Power, Petroleum and Natural Resources and other related departments attended the meeting.