Report suggests major sugar interventions
The federal cabinet reflected on Tuesday on the report of the Committee on Sugar Sector Reforms and decided that a “public debate” would be held for three weeks to collect comments from various stakeholders on the reforms in the sugar sector.
Regarding the cultivation and purchase of sugar cane, the report from the Ministry of Industry and Production recommended that the prices of sugar cane be determined by market forces and suggested the abolition of the price. indicative.
The report also recommended that “the government no longer regulates target prices for sugar cane and that ex-factory prices for sugar be deregulated as of the 2023 grinding season.”
In order to abolish the indicative price clause, he recommended the amendment of the 1950 Law on the Control of Sugar Factories. However, he proposed that two to three years be given to farmers to make adjustments.
According to the report, the price of sugarcane should be determined based on the sucrose content.
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He added that the provincial government should provide the latest equipment and laboratories to the cane commissioners to test the sucrose content and implement the new pricing mechanism.
In addition, he suggested that “there should be no crop zoning and the government should provide incentives” on crops that earn foreign exchange, such as cotton.
Suggesting the action required, he said the abolition of legislation, if any, by provincial governments regarding crop zoning and leaving the choice of what to grow to farmers or market forces. He said, however, that at present there is no law in Pakistan on the zoning of crops.
The third recommendation was that there should be adequate pricing of water on a volumetric basis to avoid market failures. This step will remove the externalities and lead to the incorporation of the real cost of sugarcane production, he said.
He suggested that the legislation by the provincial ministries of agriculture and irrigation on the water supply of cultivation areas.
The report, while suggesting the abolition of the 1966 Act respecting the establishment and expansion of sugar factories, by the provinces, further recommended that there should be a free choice of cultivation area for farmers as well. than for the private sector for the installation of sugar mills.
The report suggested that the government invest in efforts to improve seed technology and study the cultivation of beet sugar; provision of low cost finance to farmers for the purchase of inputs; and improving forecasting and providing accurate data on the sugarcane harvest.
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For data, he said, the Space and Upper Atmosphere Research Commission (Suparco) and provincial crop reporting departments needed to collaborate and use modern techniques to report accurate data on the production of sugar cane to the federal government.
Recommending an analysis of the costs and benefits of growing different crops, the report says a study was needed to examine the relative importance of crops for Pakistan’s cultivated viewing area to enable the government to design the necessary interventions.
Over the past three years, he added, the federal and provincial governments have done extensive work under the aegis of the CPEC to map the agricultural areas of the country, adding that the governments of Punjab, Khyber Pakhtunkhwa and of Balochistan had developed their ecological zones.
Regarding the grinding of sugar cane and the manufacture of sugar, the report recommended avoiding late grinding by asking provinces to make changes to the Sugar Factories Control Act of 1950 and allow provincial governments to set the date. of grinding. In this regard, he pointed out that the ideal legislation was from Sindh).
Suggesting an increase in the financial penalties for crushing late in the act, he said that “these penalties may include a fine of Rs 5 million and 12 months’ imprisonment.”
Regarding storage and sales by sugar factories, intervention in the Law on the Adequate Enforcement of the Registration of Levies has been recommended so that strict enforcement by provincial governments is ensured that no hoarding is possible.
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Regarding the fight against mismanagement of stocks pledged by mill owners, the report recommended that the State Bank of Pakistan (SBP) issue a notice to commercial banks to inspect their stocks of pledged sugar and verify their presence. with the collaboration of the FBR and the cane commissioners.
He argued that joint inspection teams of stakeholders, including the relevant bank, could be formed to verify pledged stock every three months. In the event of a diversion and shortage, the case could be referred to the Federal Investigation Agency (FIA) for criminal action against the defaulter.
In order to put an end to tax evasion, sales of benami, undocumented transactions and other widespread embezzlement in the sugar industry, the report suggested to the RBF to implement a tracking and traceability system based on the IT, to make compulsory the registration of brokers, sugar traders and wholesalers with NTN. & STRN linked to their bank accounts with mandatory godown registration and an automated online inventory management system.
To communicate accurate sugar data to the federal government, he said, the RBF should develop a digital inventory dashboard, in which data on stocks from provinces and cane commissioners could also be shared. regularly with the Ministry of Industry and Production.
To avoid speculation (Satta), he recommended that factories provide daily reports on futures contracts; specifying the amount of sugar; its reservation price and that the maximum lifting period must be 15 days.
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He further recommended that the inspection regime be strengthened to ensure that no sugar remains untransported after the expiration of the futures contract; that new legislation be introduced to deal specifically with Satta, whether physical or online, on sugar and other commodities. Futures contracts should also not be hidden and not “based on parchies”, he added.
The recommendations on wholesale and retail contain changes made to Section 250 (2) of the Companies Act 2017 by the SECP, the report said. He said the finance division is expected to amend the 2010 competition law.
In view of the fact that associations were generally the forerunners of cartels, he said, section 38 of the competition law can be appropriately amended by adding “a maximum penalty of Rs 75 million for violations committed by associations “. Mercy for insiders, who were prepared to be whistleblowers, could be incentivized for this purpose. It proposed a sales tax on the actual cost of producing sugar.
Regarding sugar exports and imports, he said, sugar imports would remain open and exports would only be considered if there was an amount of 1.5 MT more than the domestic consumption requirements. . “The government will not provide any export subsidies,” he said.
To limit the demand, he finally recommended involving the media to make it clear that the consumption of sugar leads to diseases and poor health such as obesity, diabetics, cardiovascular disease and that it is therefore necessary to raise awareness among the population. public in this regard so that “our society reduces the consumption of sugar”.
The report from the Ministry of Industry and Production came after the Sugar Advisory Council (SAB) learned of the rise in sugar prices in November 2019. On the recommendations of the SAB, the government of Punjab set sugar prices in November 2019.
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Later in January 2020, the SAB estimated that there was a real shortage of sugar, which was also putting pressure on prices. As a result, on its February 2020 recommendations, the government not only banned the export of sugar, but also allowed its import.
In addition, he said, on the instructions of the Prime Minister, the Sugar Board of Inquiry was formed under the leadership of the FIA in February 2020, which was later transformed into a Board of Inquiry under the Directorate of DG FIA in July 2020. She said the commission of inquiry has suggested a comprehensive political intervention in the sugar sector.
Pakistan has a total of 90 sugar factories including 45, 38 and 7 in Punjab, Sindh and Khyber Pakhtunkhwa (KP) respectively. In 2020-2021, according to the report, only 78 sugar factories were functional – 40 in Punjab, 32 in Sindh and 6 in KP.
The total crushing capacity of these crushers was around 800,000 tonnes per day, according to the report.
However, he added that the actual capacity used by the mills depended on the production of sugar cane in all seasons.