‘If govt continues to bail out farmers, farmers will continue to grow sugarcane’

Islamabad – While acknowledging clear indicators of cartelisation in sugar sector, Sugar Sector Reforms Committee has recommended that the government would no longer regulate indicative sugarcane prices and ex-factory sugar prices would be deregulated with effect from crushing season 2023. In a report submitted to the federal government and likely to be made public today (Thursday) Sugar Sector Reforms Committee has noted that if the government continues to bail out farmers, then farmers would continue to grow sugarcane, while the only way to curb the tendency was to withdraw export subsidies and support price.  Following the hike in sugar price in the month of November 2019,the government has taken various steps including the constitution of Sugar Sector Reforms Committee with the mandate to suggest measures to eliminate cartelisation, profiteering and market manipulations as well as to propose reforms relating to taxation and the regulatory role of  the government. The committee observed that the calculation of the cost of production carried out by sugar millers was not according to international standards. It was also felt that the existing sales tax regime for the sugar industry led to an increase in the retail price of sugar. Forward contracts and “Satta” were viewed with serious concern as methods to manipulate market forces. It was felt that there was a need for legislation after seeking input from the Commodities Exchange Control (PMEX) on forward contracts. Moreover, it was felt that there are clear indicators of cartelisation in sugar sector and CCOP should play its role. It was also realised, that CCOP should be strengthened in terms of both capacity and the legal power to penalise concerns involved in anticompetitive practices. It was pointed out that cotton producers are faced with unfavourable duty structures and support price policies, whereas sugarcane farmers are incentivised; that there has been an increase in production of maize and rice at the cost of cotton, while the area under cultivation of sugarcane is stable since 2004 till 2020. lt was highlighted that there has been a shift of sugarcane growing areas from North to South owing to mushrooming of sugar mills in cotton growing areas of South Punjab after 1998.