|I welcome our distinguished members at the 32nd Annual General Meeting
being held here at Lahore and am pleased to present you on behalf of the
Central Executive Committee the review for 1996-97. During this year the
Association had to deal with a multitude of problems, some which have had
far reaching effects on our industry.
1996-97, the year under review
was no better than 1995-96 and during both these years sugar production
remained around under 2.4 million tonnes after a record production of
about 3.0 million tonnes in two consecutive years i.e. 1993-94 and 1994-95.
This was due to shrinkage in the sugarcane plantation acreage as well
as a severe and protracted frost that further affected both recovery and
crop yields. Consequently, the production of sugar cane remained as low
as 42 million tonnes which was 10.6% lower than 1994-95 and 6.7% lower
than 1995-96. out of this the industry crushed nearly 27.15 million tonnes
which is about 64.64% of the total crop.
During 1996-97 Sugar Industry received unprecedented set backs which
have had far reaching consequences. Three main areas of concern for us
a) the effects of the import of sugar
b) the sale tax liability on bagasse for the year 1995-96
c) the reduction in storage time to 6 months for excise duty payments
d) cost of sugarcane
The continuing short all in sugar demand-supply from the 1995-96 season
resulted in the Government encouraging the import of sugar from the start
of the 1996-97 crushing season. Political over economic consideration
led to glut of sugar being imported over the year and as a result the
sugar price was driven sharply downwards. This, coupled with slow factory
sales due to cheap imports has led a disastrous financial situation for
the industry. Mill sales fell to 50% of the normal sale as the glut continued,
resulting in the failure of mills to clear farmers dues and bank loans
at high markup rates.
With production at about 2.4 million tonnes, the federal government should
have planned to limit imports up to 350,000 tonnes for the whole year.
However, inspite of explanation and repeated assurances given by the PSMA
to the concerned ministries the flow of sugar remained unchecked. This
was a typical iknee-jerki reaction to the wheat shortage that had already
occurred on behalf of the Government and the root of the current problem.
After continued efforts by PSMA and some of our members on a personal
level, regulatory duty at 10% was levied on all sugar imports, but this
was a case of itoo-little -too late. At the moment we have 400,000 tonnes
of stock lying unsold with the mills and imported sugar still being quoted
in the market. The glut will last until after the crushing season has
started. This along with surplus estimates of the coming 1997-98 season
see a grim situation being faced by the industry.
Sugar prices during the 1996-97 period have remained at production cost
or below thus adding to the bad performance of the economy as a whole.
An increase in prices is not being predicted in the near future.
SALES TAX ON BAGASSE
The Federal Budget 1997-98 announced on 13th June 1997 restored the exemption
on sale tax on bagasse when used as an in house fuel. However, the exemption
did not cover the 1996-97 season and ever though the Association has made
representation to the Government has not been considerate. With revenue
generation being a Government priority the Association will have a stiff
time fighting out this problem and might have to consider legal recourse.
STORAGE OF SUGAR
This issue has hit the mills in the worst manner this season due to the
large scale stocks being held by the mills. With huge imports in the country
the mills have been forced out of the sale market and have to now contend
with the Central Excise demand for duties on sugar that has been kept
in storage for more than 6 months. As much as the association disapproves
of profiteering and hoarding during periods of sugar shortages, this law
needs to be reviewed in period of glut when the mills have no option other
than to store sugar. Rules should not be so one-sided and the government
must also see the proposals as put forward by the industry. All we ask
is for a level playing field rather than being squeezed by the Government.
I would like to talk about the future and the challenges that awaits
the industry. If the current estimates for sugar production hold true,
the industry should produce about 3.2 million tonnes of the sugar in the
coming season. With crop estimates up in all the three province a bumper
crop should be expected. Taking into consideration the carry over stock
and the level of imports in the country the Association estimates surplus
of nearly 700,000 tonnes of sugar. Consequently, the PSMA has proposed
to the Government to allow export of at least 20% of sugar production
at the start of the season to ease the current glut situation and to allow
mills to generate funds to clear dues with farmers and banks. At the same
time a ban on sugar import has also been discussed and will be imposed
by the Government. Export prospects were discussed recently with the Minister
of Commerce and Food and we are hopeful. The problem has been further
hampered by the rising sugar cane prices making Pakistani sugar uncompetitive
in the world market. Local production cost at present are at least Rs.5/-
per kilo gram higher than the international market due to sugarcane price
and the government is in no mood to offer subsidies. Some solutions were
discussed among the members to fund the exporters for the shortfall of
the export price difference, with no final conclusion. I would like the
Annual General Meeting to form a consensus viewpoint which we can place
before the commerce Ministry. In case we fail to do so the industry out
of compulsion will have to try to restrict its production to domestic
demand by leaving surplus sugar cane in the field, an option that will
be unpalatable to us as well as the Government and farmers. The other
option is to let the price of sugar fall to Rs. 15/- per Kg which would
herald the end of the sugar industry. The delicacy of the situation is
known to you all and we have a firm decision on this matter that everybody
During 1994-95 en the export of sugar was permitted, the then Government
made a deal with PSMA to supply certain percentage of export quantity
to Utility Store Corporation on concessionary rates on cash payment. Most
members honoured the agreement, but it has been a matter of concern to
rate that some of the sugar mills have yet to clear to withheld quantity
of sugar. According to Utility Stores Corporation letter of 18th September,
1997 the cost of held up sugar amounting Rs. 120 million has now grown
up to Rs. 154 million due to markups. Since most of the mills are related
to Punjab Zone I request the chairman Punjab Zone to kindly look into
the matter and resolve the issue at his earliest.
Director Trade Organization had issued certain amendments in past, which
were not agreed by FPCCI. The Latest orders of 24th April 1997 are as
agreed by the FPCCI for incorporation in the Memorandum and Article of
Association of all chambers and Associations. The copy of this order is
provided to you in the folder. Basically the New orders restricts all
Zonal & Central elections to end before 30th Sept. and New office
bearers to take over on 1st of October. The order also demands the Association
to restrict the financial year to 30th June, and at the same time they
want renewal of membership to complete before 30th September each year.
Other clauses provided in the order deals with regulation of Election.
We will seek approval of its incorporation as we reach Agenda item 6,
and later amendments in the Article of Association will be made by our
At the end of my address I would like to register my appreciation and
thanks to Central Executive Committee, the Zonal Executive Committees,
the Central and Zonal secretariats and above all our members who have
graced this occasion and will be giving us their valuable views. A special
mention must be given to our Secretary Mr. K. Ali Qazilbash for his untiring
efforts and dedication to our Association as well as his patience and
tolerance in dealing with the Central Executive Committee chairman.