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Sugar Crisis in Pakistan 09

Sugar Crisis in Pakistan 09

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Published by victor_vick2
As per my University assignment, at Institute of Business & Management. University of Engineering & Technology, Lahore. This paper describes the Sugar Crisis in Pakistan and the reasons to it
As per my University assignment, at Institute of Business & Management. University of Engineering & Technology, Lahore. This paper describes the Sugar Crisis in Pakistan and the reasons to it

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Published by: victor_vick2 on Oct 09, 2009
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 Business Economics
 , BUS 202 Presented to Mr. Masood Haider Zaidi / Ms. Amna Niazi
 Sugar Crisis in Pakistan
It is a question that in Pakistan who is the responsible for sugar crisis and inflation of  prices in Pakistan? There are three terror tries involved in it but they are blaming eachother. One is the Government who is striving to hide its Failure in Government, thesecond one is the owners of Sugar Mills, who are gaining benefit from the failure of Government, and third one are the public who are using sugar and sugar and they do opentheir eyes when doctor diagnoses them sugar, and they don't know either this diagnose isdue to crisis or prices.Sugarcane is the second largest non-food crop after cotton and ranks fifth in respect of acreage. Prolonged drought and heat stress decreased its production by 22 per cent in1999-2000, and further 17 per cent in 2000-01.
An Introduction to Pakistan’s Sugar Industry
Pakistan is the 5
th
largest country in the world in terms of area under sugar canecultivation, 11
th
by production and 60
th
in; yield. Sugarcane is the primary raw materialfor the production of sugar. Since independence, the area under cultivation has increasedmore rapidly than any other major crop. It is one of the major crops in Pakistancultivated over an area of around one million hectares.The sugar industry in Pakistan is the 2
nd
largest agro based industry comprising 81 sugar mills with annual crushing capacity of over 6.1 million tones. Sugarcane farming andsugar manufacturing contribute significantly to the national exchequer in the form of various taxes and levies. Sugar manufacturing and its by-products have contributedsignificantly towards the foreign exchange resources through import substitution.
Key Facts
 No. of Mills81(71-Operational,2-UndeConstruction, 4-Completed)Crushing Capacity6.1 Million tonesContribution to Economy3.0 4.0 Million Tones-Share in GDP1.9%-Employment1.5 million (directly & indirectly)-Total InvestmentPKR 100 Billion (Approx)Average Yield Per Hector46.8 TonesTotal Cane Production45.0 55.0 Million TonesCane Available30-43 Million TonesAverage recovery of sugar9.1 (vs. world avg. 10.6%)Per Capita Consumption25.8 Kg Per capitaContribution to exchequerRs.12.16 Billion
Waqar Ali Khan E-048 Executive Master in Business Administration, Fall 2009
 
 Business Economics
 , BUS 202 Presented to Mr. Masood Haider Zaidi / Ms. Amna Niazi
Arguments by Sugar Mills owners and PSMA
The Mill owners demand the government should take steps to curb sugar smuggling toAfghanistan in disguise of Gur export if the government wants to control the prices of sugar in the country, mills representatives said this in a meeting of Sugar Advisory Boardheld on Tuesday. The price of sugar in Afghanistan is from Rs 75-80 per kg. The price of sugar in Pakistan is Rs 45-46 per kg. The price difference gives smugglers a chanceThe farmers have reportedly blamed the mill owners of not providing adequate payments.Records state that the payments to the growers were delayed for more than eight to tenmonths. This discouraged farmers from sowing sugar cane and opt for growing wheatinstead to avail attractive incentives. Now comes time for manipulations by the millowners. Not only are the mill owners accused of delaying payments causing a decrease insupply of about 15 to 20 percent as compared to last year, they have also hoarded largeamounts of supplies. These supplies have been hoarded (conveniently) in order to createan artificial shortage in the market. The shortage then allows them to release stock as theywish with prices that give them maximum profit. A man made crisis, which in fact is amonopoly to earn maximum profit during peak consumption. Withholding supplies andincreasing prices for maximum profit has become a popular tactic. Previously during thewheat crisis reports of withholding stocks kept surfacingAccording to a press release by Pakistan Sugar Mills Association, dated July 23, 2009;Sugar mills have stocks of 1.74 million tonnes white sugar, which are sufficient to cater to the domestic requirement as of June 30, 2009 until the start of next crushing season in November, said Pakistan Sugar Mills Association, Punjab Zone Chairman, Javed Kayani.He said keeping in view of the sugar stocks and consumption pattern of the country wecan assure that there is hardly any possibility of shortage of the commodity in the currentcalendar year. Replying to a question, Javed Kayani said cancellation of sugar importtenders by Trading Corporation of Pakistan (TCP) was a step taken in the right direction.As a result of this decision, government has saved huge amount of foreign exchange, as price of the commodity has increased manifold in the international market. He said lastyear well before start of crushing season 2008-2009, PSMA had proposed to thegovernment that raw sugar may be allowed to be imported to maintain strategic buffer stock and to keep the price of sugarcane and sugar under control.So On 23
rd
of July 2009, the PSMA Zonal Chairman could not expect a shortage, theyalso canceled the import and right after a few days there is a shortage. How can weexpect that?
Waqar Ali Khan E-048 Executive Master in Business Administration, Fall 2009
 
 Business Economics
 , BUS 202 Presented to Mr. Masood Haider Zaidi / Ms. Amna Niazi
Arguments by Govt. official
Recently Supreme court of Pakistan has taken notice and has advised to sell the sugar atRs.40 per Kg. During the hearing of a case regarding sugar prices, Chief Justice Iftikhar Chaudhary said they should have implemented on the verdict of High Court, instead of challenging the high court’s verdict in the higher court. He faced the government officialsand said, ‘You came here for the perpetuation of this cartel and that sugar be sold atRs60/kg.’Minister for Industries Mian Manzoor Ahmad Wattoo said Tuesday that sugar millersshould abide by High Court orders on sugar, if production cost falls below Rs40/kgwhereas Sugar Mills Association President Sikander Khan said that High Court’s rulingis impracticable and they are willing to face the charges of the contempt of court in thisregard. In a meeting of Senate Standing Committee on Food and Agriculture the Minister of Industries stated that High Court’s decision on sugar should be followed.” Governmentis taking care of the people, however sugar mills too belong to Pakistan and not to anyhostile state.”Manzoor Wattoo said the Cabinet would hold a special meeting on sugar crisis, in which the Ministry of Industries will give a briefing on the issue.The federal cabinet has allowed private sugar millers the import of 0.35 million tons of raw sugar before the start of crushing season in October or November as the food andagriculture ministry anticipates a sugar shortfall of 1.5 million tons in 2009-10. The firstreaction to the federal government’s decision to increase sugar price came from thePunjab government saying Islamabad did not consult the provincial government over increasing the sugar price. The provincial government is determined to sell sugar at Rs40in the province. The Punjab Chief Minister Shahbaz Sharif appealed to the federalgovernment to relax sales tax and excise duty on sugar.The Punjab government allegedthat the Federal Minister for Production Mian Manzur Ahmad Watto had unilaterallydecided to raise the price of sugar without consulting Punjab.There are 82 sugar mills for crushing cane in the country but no sugar refinery for  processing imported raw sugar for public consumption. Imported raw sugar is only processed by mixing it with cane juice during the crushing season. The government is allset to give a go-ahead to the private sector to set up a sugar refinery at the Gwadar port tomeet local demand in the wake of high prices of the sweetener in the internationalmarket.Pakistan, Asia’s third-biggest user of sugar, bought 25,000 tons of white sugar fromDubai’s Al- Khaleej Sugar Co. to bolster supplies and reduce prices.Trading Corp. of Pakistanbought the sugar at $676 a ton, including freight costs,
 
Pakistan may need toimport as much as 1 million tons by December, the Pakistan Sugar Mills Association saidon Aug. 19, 2009
Waqar Ali Khan E-048 Executive Master in Business Administration, Fall 2009

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