Sugar mills pay loans to get 1.66m tonnes hoarded stock back from banks

[Naveed Yaseen]

By Razi Syed

KARACHI: Leading sugar mills retrieved around 1.66 million tonnes of sugar stocks lien under different commercial banks after paying back loans of Rs 22.4 billion, a well-placed source in the Trading Corporation of Pakistan (TCP) said Tuesday.

The sugar mills had kept the stocks with the commercial banks to obtain loans. After having earned windfall profits by hoarding sugar they have now repaid more than 50 percent of the loan and are able to get their sugar stocks back.

“Besides artificial shortage of sugar for collusive pricing the stuck up stocks for loan have also been a major reason behind sugar crisis,” he informed.

A number of sugar mills owned by renowned political persons have been involved in artificial shortage besides they stopped to lift the remaining stocks of imported sugar from TCP.

“This action was taken by the mills after advice by Competition Commission of Pakistan (CCP) to terminate the agreement between All Pakistan Sugar Mills Association (APSMA) and the Ministry of Industries and Production for fixing the ex-mill rate in Sindh and Punjab.

“Only around 910,000 tonnes of sugar stocks are lying with the commercial banks and it is hoped that mills will bring their stocks around 1.65 million tonnes back into the open market,” he hoped.

A cartel of sugar mills quoted Rs 45 per kilogramme (kg) to lift sugar from the stocks of the TCP in order to sell it for more than Rs 50 per kg at retail level.

The official said TCP through tenders sold around 10,000 tonnes imported sugar while the buyers have so far lifted only 2,100 tonnes of the commodity.

He said, “This is routine procedure of TCP to accept higher bid from the buyer and TCP is not involved in high pricing of the commodity,” he added.

He said these sugar mills have stocked over 75 percent of sugar production to create artificial sugar shortage in the country so that price could be manipulated on their whims.

”We are in the market to stabilise the price and not to get involved in price war as TCP stands for supporting the market,” he ascertained. He said according to laid down procedure the TCP has the right to cancel the remaining rights of the buyers if they failed to lift the commodity after the date they quoted in the tender document. He said, “TCP did not procure sugar from mills since October 2008 and is still offering imported sugar tenders for sale then why is the country facing sweetener crisis.”

The sugar price has touched around Rs 56 per kg at retail level and the government failed to take appropriate measures to thwart off the root causes of the rising trend in the prices.

The CCP in a policy note to the federal government recommended it to terminate the agreement between the APSMA and the Ministry of Industries and Production for fixing the ex-mill rate of sugar in Sindh and Punjab.

Chairman CCP, Khalid Mirza urged to desist from entering into arrangements that have the affect of encouraging collusive behaviour on the part of economic agents in any sector. A spokesman of sugar mills association said that the mills could not sell sugar at Rs 40 per kg as they bore around Rs 34 to Rs 38 per kg production cost.

International scenario: The sugar prices in the international market started declining and on back of Indian government’s orders to sugar mills to double their production.

“The sugar price touched around $600 per metric tonne in the international market,” analysts said. The price of sugar in the international market witnessed an increase of $10 per tonne during a month. He said now October contracts in international market changed hands at 21.60 cents per pound (6.7 percent low). At London Commodity Exchange Market, contracts changed hand at $537.20 per tonne with a decline of around $13 per tonne. Four-time more rains in Brazil affected sugarcane production in the country while worst-ever drought in India during the last 83 years has also contributed to the sugarcane production loss. He said low production and more than usual imports by China, Russia and European Union countries also fuelled the international sugar prices. He said in September 2010 the demand and supply gap of sugar in international market would be 5 million tonnes.

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