As usual, the sugar industry and importers had got seasonal loans from the banks for 2005-06 at marginally low interest rates and they were to pay the loans with interest by November 30.
The banks have always been a main source for working capital for the sugar industry and importers since their operations involve billions of rupees every year. The situation is also not different this time.
The officials who are directly responsible of monitoring sugar prices were of the view that everything could go fine and smooth if the industry had not betrayed the government. "It is not the only betrayal but the sugar crisis, an outcome of massive hoarding of stocks by the sugar mills, which invited the government's harsh reaction for correction."
They said that the SBP directive was basically meant to force the hoarders to bring their stocks in the market to rationalise sugar rates, "and its result is perhaps more than the expectations. It's the SBP's action that forced the mill owners to offer their stocks to the government at the landed cost of imported sugar."
Sugar crisis justifies every action against the mill owners. It is an established fact now that they had exploited the market to get windfall profit during the last few months.
However, the importers do not deserve the same treatment from SBP. They had placed the orders for import of sugar on government's request to improve the demand and supply through imported stocks. It is unfair to club them with sugar mill owners.
Sugar mills owners had violated every rule of the game to fleece the poor consumers by selling sugar at irrationally higher prices and whenever the government asked them to become fair they reminded it of a free trade market that leaves no room for its intervention. Their leaders did not hesitate from ridiculing government officials whom they thought were unnecessarily intervening in the industry's affairs.
After SBP's action the same industry is now pleading with the government to buy its stocks at imports landed cost. The question that officials would ask the sugar industry's bigwigs is why they did not make the offer when sugar mills were selling stocks at Rs 42 and Rs 44 per kg.
The importers have formally made the offer to the government to sell their stocks at Rs 33 per kg. Their offered price is less than the cost price by around Rs 2 per kg.
Pakistan Commodities Importers and Traders Association (PCITA) Chairman Ashraf Tarmuhammad in his letter addressed to Prime Minister, Shaukat Aziz, and advisor on Finance Dr Salman Shah said: "This is with reference to my telephonic discussion with you on sugar sale offer. I have been approached by a number of commercial importers and wholesalers who were concerned over the latest decision of the State Bank, imposing 50 percent cash margin. Following the move, banks have asked them to clear all outstanding loans by July 31. The commercial importers want some relaxation in SBP's new conditionality and offer their stock to the government at Rs 33 (inclusive of sales tax paid at import stage)."
Later on Friday talking to Business Recorder, Ashraf said that international market was showing big downward trend, and if the government did not come to rescue the importers, SBP's new directive would hurt them very seriously.
The importers who have offered their stocks to the government include General Trading Establishment Karachi, 15,000 tons; Fatima Sugar Mills Multan, 25,000 tons; Pacific Chartering & Trading (Pvt) Ltd, Karachi, 12,500 tons; Pirnai Trading, Karachi, 10,000 tons; Faran Sugar Mills Ltd, Karachi 13,775 tons; Thara International, Karachi, 4,000 tons; DD Ship Breakar, Karachi, 4,000 tons; Moon, Karachi, 2,000 tons; Chawla International, Karachi, 10,000 tons; Al Hamza, Karachi; Idress Steel Co, Karachi; Tahir & Co, Lahore; United Commercial Corporation, Lahore; Pakistan Sesame Mills (Pvt) Ltd, Karachi; Venus Traders, Karachi; Habib Sugar Mills, Karachi; Dewan Sugar Mills, Karachi; Abdul Rauf Traders, Karachi; Amin Basheer & Co, Karachi; Abdul Rehman Abdul Ghaffar; Standard Edible Oil, Karachi; Sikandard Commodities, Karachi; Mirpurkhas Sugar Mills Ltd, Karachi.