Insight on Sugar report !

Support price for sugarcane increased 15% during the period from 190 Target price to 218.85 Average Purchase Price

Thread !

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Area of cultivation this year decreased by 2.68% while sugar cane production ow increased by 1% from last year. A marginal increase.

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Difference between Quantity of sugarcane produced and sugarcane crushed by sugar mills is not verifiable as it is also consumed in production of Gur and raw use and there is no system to record such consumption.

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Rumors about low area of cultivation low carry over stock and less production of sugarcane contributed in the hike of price .

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The price of sugar significantly increase from 55 in January 2019 to 71 in June 2019. This was well before current year production cycle ends. That means there is no connection between the increase in price and shortage of supply .

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Minimum support price is increased to encourage farmers for cultivation however the minimum price increase was announced just before crushing season in October by Punjab and after the season in Dec by KP and Sindh hence serving no purpose for high cultivation
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Support price of sugar was increase from 180/40 kg to 190/40 kg in Punjab and KP and 192/40 kg in Sindh . The support price was not enhanced since 2015-16

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The sugarcane was purchased 15% higher in the whole country .
In Punjab 217.90 and KP 211.37 against target price of 190/40Kg while in Sindh at 227.29 against target price of 192/40kg.Due to speculation there was competition between the mills to purchase sugar cane.
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Pakistan sugar mill association strike due to low supply of sugarcane was not plausible and was an attempt to bring sugarcane prices down. But surprisingly after the strike purchase price increased from 203 to 229 in Punajb and 211 to 243 in Sindh.

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Majorly due to immense competition. Important to mention that their is no system to invoke mills if they temporarily stop operations during the crushing season. National consumption is in hands of PSMA (Pakistan Sugar Mill Association)
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Shocking that neither any province nor federal had any knowledge about how Ex-mill price for sugar is calculated . Recently PM has tasked ministry of industry to carry out this activity . Neither any past govt paid any attention to this fact.
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Ministry of industry has tasked competition commission of Pakistan to calculate Ex-mill price for sugar. The formula provided by CCP and PSMA includes many difference ! As below
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A major component of the formula is recovery ratio which surprisingly is different for even same region crushing similar type of sugarcane. Sugar mills allegedly manipulate the recovery ration to show lesser production and sale remaining sugar of the books.
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Recovery ratio is obtained through Lab testing done by the sugar mills and no independent method available with government to verify it other than relying on their reports . Alleged tax evasion and smuggled sugar is obtain by this way .
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Below six groups control 51% of national sugar production. Cartelization of below group has the capability to manipulate market price for sugar. Mostly with political background and strong influence over administration.
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Possible cartel is evident through same tender price offered by almost all mills during Utility corporation tender . It is nearly impossible to offer same price with varying cost of production.
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Responsibility for allowing export in contrast to low carry over stock and low production lies with Sugar Advisory Board . Concerned were raised in June 19 however ban on export was imposed in Feb 2020.

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This year only Punjab offered subsidiary of 5.25/kg with a total of Rs 3 billion. However, in wake of rising prices subsidiary was withdrawn in May 2019. The subsidiary was from January 19 onwards.
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Subsidies availed by groups as below !
In 5 months maximum portion of subsidiary was availed by the mill owners. 2.47 billion or 82% was availed during such short period.

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Exporters benefited in both ways ! They availed subsidiary of 5.25/kg and afterwards enjoyed sale of sugar in local market at high price .
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Commission is formed for forensic audit of below sugar mills within 40 days . 09 team on ground to conduct audit.

Above thread may help you in understanding Sugar Crisis @ajmaljami @MehrTarar
@iihtishamm @nadia_a_mirza @AdilabbasiAry @Kashifabbasiary
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