Since the high-level decision of ECC taken on January 12 has not yet been implemented in letter and spirit, stakeholders are forced to believe that a "favourable pitch" is being laid for the Dubai supplier's monopoly to prevail for all sugar imports into Pakistan.
Stakeholders have demanded that to ensure transparency in this transaction, Public Procurement Regulatory Authority (PPRA) rules should be strictly followed and not changed to accommodate this transaction which appears to be happening. All international suppliers should be invited for direct negotiations and a high level committee representing the Finance, Industries and Commerce ministries should be formed to assess and finalise any transaction, they said.
According to stakeholders, the Dubai supplier is deceiving the Government of Pakistan with their offer to supply sugar on a three month deferred payment basis. This is not a government to government deal instead it is authorised by the Dubai Chamber of Commerce making it a commercial transaction.
Philippines is a non-sugar exporting country and it exports 75,000-150,000 metric tons per annum against a quota at a very high price and, therefore, this price does not reflect the international market and cannot be used as a benchmark. A government to government deal would normally offer a credit programme for at-least one year or more and a three months credit offer is an insult to the Government of Pakistan.
Examples of such deals/offers in the past include Saudi Arabia's two-year credit programme for supply of urea. Furthermore, in the past the US, Canada and Australia have also offered credit programmes to the Government of Pakistan for 2-3 years of wheat.
Stakeholders say that ins pite of these facts if the Government of Pakistan still insists on entertaining a three month deferred payment from UAE, then the government must insist that the entire quantity must be produced and shipped from the UAE alone to justify a "government to government" deal and such deal must be signed with the UAE federal government and not with Dubai Chamber of Commerce.
This direct shipment precedent has already been set in the case of Rice Export Corporation, wherein it sold against an export contract to the Portuguese government on a government to government basis where the shipment was restricted from Pakistan to Portugal only.
This was not accepted by Portugal and, therefore, the contract was cancelled. In case shipment from third countries is allowed that would be categorised as a commercial transaction and if that is the case then other international sugar trading companies should also be invited to have transparency in direct negotiations that would allow the government to obtain best terms and prices.
Stakeholders are confident that if the government still insists to pursue this conspicuous deal with the Duabi supplier, the government will miss the opportunity of getting better prices from reputed international trading companies. To have any transparency, it is important that international trading companies should also be invited for direct negotiations for their offers based on three months deferred payment as well.
On the issue of International Commission for Uniform Methods of Sugar Analysis (ICUMSA), stakeholders said it is a well known fact that internationally white sugar is produced and traded basis 45, 100 and 150 ICUMSA. However, the Pakistan Standards & Quality Control Authority (PSQCA) standard which requires 80 ICUMSA stands in the middle somewhere and, therefore, cannot be used to buy sugar from world-wide sources.
ICUMSA reflects the degree of whiteness and has no bearing on the other characteristics including sweetness of the sugar. 45 ICUMSA is the most widely produced and traded variety world-wide. All major sugar producing and exporting origins, Brazil, China, EU and Thailand - predominantly produce 45 ICUMSA.
In fact, white sugar futures which are traded in London at The London Futures Exchange are based on 45 ICUMSA as well. Therefore, to be in line with international sugar trading, Pakistan like all other importing countries should follow ICUMSA specification of 45, 100 or 150.
Pakistan standard for sugar (PS-1822) of 80 ICUMSA was formulated for the sale of standardising the local industry and is applicable to local manufacturers only and is not in line with the international sugar trade. Stakeholders said that in order to provide a level playing field to all the suppliers and origins - Brazil, Thailand, China and EU - Government of Pakistan should import sugar either basis 45, 100 or 150 ICUMSA.
In order to meet the requirement of 80 ICUMSA all international sugar traders have to offer basis 45 ICUMSA, which is usually sold at a premium of USD 7-15 per metric ton over 100 ICUMSA. Only the Dubai based refinery which imports all its sugar from Brazil and refines it, can make sugar to meet exactly 80 ICUMSA requirements and thus is able to out price competition.
Similarly, internationally sugar is traded basis the following packing clause: "In standard export packing in new polypropylene (PP) bags with an inner polythene lining. The contents of sugar in each bag should be 50 kg net. The bags should be strong enough to withstand wear and tear in transit. The total weight of empty bag and inner lining should not be less than 135 grams."
However, the PSQCA standard (PS-3128 for woven polypropylene sacks), which was once again formulated for local manufacturers only is not in line with international trading practice and, therefore, restricts all other major sugar producing/exporting origins - Brazil, Thailand, China and EU - because they have standard PP bags which although are much superior in weight and quality than the PSQCA standard, cannot meet the length criteria as they are 10 mm shorter in length, which is clearly not a quality parameter.
PSQCA has also conceded in its clarification as follows: "Besides, the standards [PS-1822 for sugar and PS-3128 for woven polypropylene sacks] have been revised in accordance with the domestic requirements and technological level of the country. The standards are applicable to all manufacturers in Pakistan without any discrimination and in no case are binding on foreign manufacturers."