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The deal over cane crushing schedule between the government and Pakistan Sugar Mills Association (PSMA) has collapsed as the industry disgruntled over Trading Corporation of Pakistan's recent tender decided not to start crushing.

Sources said that PSMA chairman Shunaid Qureshi formally conveyed to the Advisor to Prime Minister on Finance, Dr Salman Shah, that since the government did not honour commitment of lifting 200,000 tons sugar from the mills from existing stocks and then again equal quantity from fresh stocks on the closure of crushing season, in the given situation it was not possible for the industry to abide by the agreed schedule for starting crushing season.

The government and PSMA had struck a deal last month to start crushing in Sindh and Punjab from November 1 and 10, respectively. Since the industry was facing crisis due to glut-like situation, the government gave a commitment to PSMA that it would direct TCP to lift 200,000 tons sugar to facilitate the crushing season and pay the mills money for providing working capital.

However, TCP tender of buying and selling 25,000 tons sugar irked the industry. Its representatives held a meeting in Lahore the other day, and decided not to start fresh crushing even after the deadline agreed with the government.

A Lahore-based miller, who attended the meeting, told this correspondent on Wednesday that PSMA had rejected TCP tender as a whole and conveyed the decision to the provincial zones to remain indifferent to the crushing schedule.

It is evident that the industry picked up huge loss during the last one year and now it cannot go for fresh crushing without government facilitation in the form of lifting of unsold stocks at reasonable price. It is also certain now that the government's policy of dumping imported sugar at any cost in 2005-06, in the local market, left the industry in complete chaos.

Its one negative factor is that majority of the mills have failed to pay back seasonal loans to the banks, besides falling short of payments to the growers. The mills neither have money to pay to the growers nor working capital to begin crushing season. Three factors mainly pushed the industry into trouble. These included TCP's ill scheduled offloading of the stocks, misuse of Afghan Transit Trade Agreement (ATTA) and massive production of out of books sugar.

The government should understand the mechanism of sugar sector and take some immediate measures to save the deal with the industry for early start of crushing season otherwise it will be too late to keep the ball rolling and the whole chain will suffer for it, he said.

Copyright Business Recorder, 2007

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