Ministerial body proposes major reforms in sugar sector – Journal

• SSRC recommends sugar cane pricing based on sucrose content
• Green light given to importing sweeteners, export to control
• Heavy penalties suggested for delayed crushing of sugar cane, cartelization

ISLAMABAD: A ministerial panel called on Wednesday for a major reform of the sugar sector, suggesting a change in sugar cane prices on the basis of sucrose content without any role of government, the freedom to import sugar but controlled exports in the event of a surplus and the imposition of heavy penalties for delayed crushing and cartelization of sugar cane by the mills.

The Sugar Sector Reform Committee (SSRC), headed by Energy Minister Hammad Azhar, was formed by the federal cabinet in June 2020 following the massive price hike in November 2019 and subsequent investigations by Federal Investigation Agency (FIA).

The crisis had shaken Pakistan’s Tehreek-i-Insaf (PTI) government in Central and Punjab, leading to a rift between Prime Minister Imran Khan and his longtime friend Jehangir Khan Tareen.

The reform committee suggested a series of amendments to several federal and provincial laws and set new roles for Pakistan Commodities Exchange Control (PMEX) and Suparco to streamline the entire supply chain.

He suggested increasing the fine to 5 million rupees as well as a one-year jail term for late crushing plants and imposing a sentence of 75 million rupees for cartelization.

The SSRC acknowledged that the Sugar Advisory Board based at the Ministry of Industry and Production had found that the November 2019 price hike was not due to market forces and called on the provinces to invoke the law. on price and profit controls to combat unfair market practices. However, later the board ruled that “there was a real shortage of sugar”, putting pressure on prices, and therefore banned the export of sugar but advocated imports.

The committee recommended strong media campaigns against the use of sugar by people because of its health risks, as it noted that 30% of the total sugar produced was consumed by households while the remaining 70% was used. for commercial purposes.

He said the main reason for the price volatility and speculation was the result of an unrecorded supply chain in undisclosed locations.

Therefore, he suggested that the merchandise be deposited in licensed warehouses regulated by a collateral management company (CMC) after due diligence of customers through electronic warehouse receipts, while its trading and settlement records are kept by PMEX to provide a level playing field for market participants. for efficient price discovery.

The committee recommended the abolition of legislation by provincial governments on crop zoning and leaving the choice of what to grow to farmers and market forces.

On the issue of delayed crushing, the committee observed that the 1950 Sugar Factory Control Act provided for crushing between the period of October 1 to November 30 of each year, which was a considerably long period and should be shortened. .

The committee stressed the need to provide the provinces with legal instruments to intervene in the event of delayed grinding, and observed that the legislation implemented by Sindh was ideal as no date was set and the date of grinding was approved by cabinet annually under the Sugar Agreement. Factory Control Act 1950.

He also proposed amendments to the 1950 Sugar Factory Control Act to remove the target price, but asked to give farmers two to three years to make adjustments.

The price of sugarcane should be based on the sucrose content and the provincial government should provide the latest equipment and laboratories to the cane commissioners to test the sucrose content and implement a new pricing mechanism, a-t -He suggests.

The committee also called for adequate pricing of water on a volumetric basis to avoid market failures and eliminate externalities, leading to the incorporation of the real cost of sugar cane production. Under the new legislation, provinces would be required to provide water to growing areas.

He said that farmers and the private sector should have free choice of the area of ​​cultivation and installation of sugar factories through the abolition of the 1966 Law on the Establishment and Expansion of Sugar Factories.

The government would invest in efforts to improve seed technology and study the cultivation of beet sugar, and the relevant authorities would launch seed improvement programs to improve the sucrose content of sugarcane and increase crop yields. hectare while consuming less water.

To improve forecasting and the provision of accurate data on sugarcane cultivation, Suparco and the provincial crop reporting departments should collaborate and use modern techniques to accurately report data on sugarcane production to the country. federal government.

He also suggested a cost-benefit analysis of growing different crops to examine the relative importance of crops for the Pakistani cultivated viewing area to enable the government to design the necessary interventions.

The State Bank of Pakistan would be required to advise commercial banks to inspect their pledged sugar stocks and verify their presence with the assistance of the Federal Board of Revenue and the Cane Commissioners. sugar.

Pakistan’s Securities and Exchange Commission would be required to amend relevant laws for auditing sugar mill cost accounts.

Posted in Dawn, December 16, 2021

Rachel J. Bradford