Government crackdown against sugar mills: Millers refuse to retire Rs 40 billion SBP loans/advances

KARACHI (September 07 2009): The sugar mills' owners have expressed their inability to pay off/retire Rs 40 billion loans and advances that they owed to State Bank of Pakistan (SBP) due to ongoing crackdown against the millers by the government.Talking to Business Recorder, Chairman Pakistan Sugar Mills Association (PSMA) Iskandar Khan said due to the crackdown of law enforcement agencies on the directives of government against sugar mills, the industry became bankrupt and it is impossible to retire the huge amount till October 31. The PSMA chairman said the government had opened tenders for the import of expensive sugar from international market by neglecting the local industry due to which the millers could not sold their sugar stocks in the market.Currently, the sugar mills have a stock of 1.3 million tons of sugar, but the government has started crackdown against the sugar mills to recover the stock under the cover of hoarding. "The sugar mills owners have decided to close their factories and stop supply of white refined sugar to the wholesale market until the operation against the millers is stopped," he added.It may be mentioned here that the SBP had reviewed the issue of final adjustment of loans/advances against pledge of sugar stock (both raw and refined) on the representation made by different stakeholders. After reviewing the situation, the central bank, granting three-month extension, has advised banks and DFIs to ensure adjustment of entire loans and advances against pledge of sugar stock (both raw and refined) by 31st October, 2009 positively, instead of July 31, 2009.The chairman argued that it is not possible for the sugar mill owners to sale refined sugar with ex-mill rate of Rs 36/kg while the cost of production on the manufacturing of sugarcane stood at Rs 38/kg. "The price of one kilogram sugarcane is Rs 35 and the millers paid Rs 2.31/kg General Sales Tax (GST) and 45 paisa Federal Excise Duty (FED) to the government, so how it is possible to sale sugar at the ex-mill price of Rs36/kg," the PSMA chairman added.