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Punjab sugar mills estimate manufacturing cost at 106/kg - Inside Financial Markets

Punjab sugar mills estimate manufacturing cost at 106/kg

– The News

Sugar millers on Tuesday voiced concerns over ex-mill price of Rs80/kg set by the Punjab government in a wide contrast to Rs104 to 106/kg of manufacturing cost estimated by them.

“All the sugar mills of Punjab have gone into an utter financial disadvantage,” said Pakistan Sugar Mills Association, Punjab Zone, referring to price fixation of Rs80/kg by government of Punjab. Federal government notified ex-mill sugar price at Rs85/kg.

In a letter to Hammad Azhar, minister for finance, revenue, industries and production, the association said cost of production of sugar in Punjab sugar mills has gone to Rs105.77/kg due to very high sugarcane price of up to Rs350/40kg. The provincial government kept the support price of sugarcane at Rs.200/40kg.

Previously, the government previously expressed inability to control sugarcane prices moved by market forces.

“Sugar industry is heading towards crises like situation, where most of the mills might end into default in payment of bank loans, payment to growers, sales tax dues, income tax and other government dues of multifarious nature,” the association said.

PSMA also brought several other associated issues for the consideration of the government in this regard. Owing to severe financial stress, salaries and wages to employees would also be affected as hundreds of thousands of families directly or indirectly are dependent on the sugar industry.

Moreover, sugar which industry is giving for poor segment of the society has in fact due to the involvement of investors is reportedly going out of Punjab.

Manufacturers also criticised provincial government for inaccurate figures presented in the court about consumption of sugar in Ramazan. The quantity required for Ramzan bazaars by the province’s own determination is 30,000 tons whereas the provincial government is lifting 155,000 tons, according to PSMA. This gap has given the investors incentive to get themselves involved by getting registered for quota allocation and black-market the subsidized sugar in Punjab and also smuggle it to other provinces.

Interestingly, PSMA mentioned two slightly different cost of productions of sugar in the correspondence with the ministry of industry.

Sugar manufactures asked the federal minister to discuss the issues, including fixing of sugar ex-mill price at Rs80/kg against actual cost of production and its devastating impact on the sugar industry.

The supply chain management also needs to be looked after, as no sugar is sold to anybody other than the government of Punjab registered dealers. The millers also were concerned over tax recovery notices of billions of rupees being issued to sugar mills by the Federal Board of Revenue in addition to enquiries by the National Accountability Bureau and Federal Investigation Agency against sugar mills. Millers also want to discuss with the government issues relating to pending cane payments on sugarcane supplied by farmers to sugar mills in the province.

“Very early action would be taken to rescue the Punjab sugar industry from the adversaries being faced at the moment. Any delay in redressing these issues will further add to the ongoing crisis in the industry,” said the sugar body.

Syed Zaki Hussain

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)