Islamabad: Sugar industry in Pakistan has been demanding that the government allow at least 850,000 tonnes more sugar exports, worth around $485 million, given the projected 3.2 million tonnes of surplus stock, reports The News.
This request follows the earlier approval to export 150,000 tonnes of sugar, valued at $90 million, which was granted in light of the bumper sugarcane crop this year.
In a communication dated August 1, 2024, to the Commerce Minister, the industry pointed out that the cost of sugar has increased by Rs17.70 per kg due to the imposition of new taxes. Specifically, a Federal Excise Duty (FED) of Rs15 per kg has been levied on the supply of sugar by any person to a manufacturer, processing, or packaging entity. Additionally, the impact of Sales Tax at Rs2.70 per kg has further contributed to the overall price hike.
It was pointed out by PSMA that the ECC of the Cabinet had already allowed the export of 150,000 tons of sugar, subject to the condition that the exporter shall ensure shipment within 45 days of allocation of quota by the cane commissioners of the respective province. However, the industry lost 16 days due to delays in communication between the Ministry of Industries and Production and the Federal Board of Revenue (FBR) regarding the unblocking of the HS code for sugar export following the quota allocation by the cane commissioner of Punjab on July 1, 2024. As a result, the export process only commenced on July 16, 2024. The industry is now requesting an extension, asking that the shipment period be extended to 60 days from the date of quota allocation instead of the original 45 days.
In addition, the industry is seeking an additional 15-day extension for the first export permission of 150,000 tonnes.
While requesting a second export permission, the PSMA argued that as of July 15, 2024, there were 1.2 million tonnes of surplus sugar in stock, which is expected to rise to 1.5 million tonnes by the end of November. The industry is proposing a new tranche of 500,000 tonnes for export, with an estimated value of $275 million, under the same terms and conditions as the previous tranche, with a few modifications. These changes include ensuring that shipments are completed within 60 days from the date of export quota allocation and allowing sugar exports through Letters of Credit (LCs) as in previous years. The industry also requested that the State Bank of Pakistan (SBP) direct banks to accept export proceeds from third parties for exports to Afghanistan. Additionally, they suggested raising the ex-mill local sugar price benchmark to Rs150 per kg for the second tranche of sugar export due to the increase in Withholding Income Tax from 0.20% to 2%, resulting in a net impact of Rs2.52 per kg.
The industry is also seeking a third export quota, having held the country likely to witness another bumper sugarcane crop for the 2024-25 crushing season, with an estimate of sugar production ranging between 7.5 million and 8.0 million tonnes. This will add an extra surplus of 1.5 to 2 million tonnes. The industry has applied for approval of another 350,000 tonnes of sugar for export in September 2024, worth about $210 million, to control two-thirds of the expected surplus by the end of November.
