PSMA for withdrawing 15pc regulatory duty on exports of molasses

Molasses is a major bi-product of the sugar industry and its annual production is almost half of total quantity of sugar produced in country

ISLAMABAD  -  Pakistan Sugar Mills Asso­ciation (PSMA) has requested the Federal Minister for Com­merce & Industries that al­ready imposed 15% regulato­ry duty on exports of molasses may be withdrawn.

In a letter written to the min­ister, PSMA (Punjab Zone) said that a meeting may be con­vened with all stakeholders to discuss a way forward so as to ensure that the rights of all par­ties are carefully considered, deliberated upon and resolved in a fair and equitable manner.

Sugar producers in Pakistan face cyclical sugar turmoil which is manifest from perusal of economic data of the last de­cade. The sugar industry is an overregulated industry both at the provincial as well as the federal level. Besides the same, the escalating cost of inputs particularly procurement of sugarcane at the notified sup­port price, along with inad­equate prices of sugar within Pakistan, have created extreme economic and financial diffi­culties for the sugar industry.

Certain sugar mills by way of heavy capital investments installed ethanol production distilleries. The members of this distinct group represent­ed by PEMA, desire to procure and consume inexpensive sug­arcane molasses as basic raw material for conversion into Ethanol, export the same and earn substantial profits. How­ever, majority of sugar mills lack such an infrastructure. They thus, directly export the molasses to fetch valuable income in foreign exchange which augments and supports their sugar production opera­tions and sugarcane payments.

After 2009 PEMA got im­posed regulatory duty on ex­port of molasses to procure subsidized sugarcane molas­ses which is basic raw material for manufacturing and export of ethanol. In recent years, ethanol production and export by PEMA members has shown a healthy increase. These pro­ducers ostensibly have a grow­ing appetite for inexpensive locally produced sugarcane molasses. It was under their influence that regulatory duty on export of sugarcane mo­lasses was initially imposed @ 10% which was then in­creased to 15%. Now, once again, there is a move by these units to seek either a total ban or increase in regulatory duty to an astounding rate of 50%.

The entire objective of these PEMA members is to procure sugarcane molasses at cheaper rates within Pakistan so as to facilitate their ethanol produc­tion and export. The stated ob­jective sought to be achieved is in utter negation to free and fair competition for such sugar mills who do not have these distilleries and merely export sugarcane molasses.

One dimension of this move is a recent representation made before the Ministry of Commerce and Industry by PEMA. This has culminated in proceedings before the Na­tional Tariff Commission, Gov­ernment of Pakistan, which is now deliberating on the sug­gestions of PEMA.

Non- Distillery Sugar Mills /Members of Pakistan Sugar Mills Association-Punjab Zone (29 out of 41) held an exten­sive meeting on 29.02.2024. Therein, they expressed their dismay and anxiety on the is­sue as molasses is a major bi-product of the sugar industry and its annual production is almost half of total quantity of sugar produced in the country.

Export of molasses had been a source of cash generation for the mills for timely payment to its growers while its local con­sumption used to be only 5% of its total production and remain­ing 95% was directly or indi­rectly exported by sugar mills. 

If we analyze the data we find that quantity of molas­ses exported has considerably decreased after imposition of Regulatory Duty in 2009 and at its maximum was not more than 10 per cent of molasses produced in the country. Mo­lasses export serves as a good parameter to determine local prices of molasses consumed internally by the distilleries.

By discouraging molasses export, cartel buying of mo­lasses by the distilleries will be encouraged causing heavy losses to the non-distillery sugar mills. Overall impact of value addition of molasses into ethanol is hardly around 8 per cent. Currently exporting molasses directly fetches more foreign exchange compared to converting into ethanol and then exporting it. In case of surplus molasses production in the country and unfavorable international ethanol prices the non-distillery sugar mills will not be able to dispose of its molasses and will suffer heavy losses.

The analysis shows that the request of PEMA to increase regulatory duty or place a ban on the export of sugarcane molasses is wholly and in to­tality unjustified. It is against the constitutional and legal rights of the sugar manufac­turers/molasses exporters. As per the Constitution of the Islamic Republic of Pakistan, 1973 and its accompanying laws, the right to free and fair competition is secured and guaranteed to all entities, in­cluding sugar manufacturers. This right cannot be abridged or circumvented at the be­hest of anyone.

PEMA members have the option to obtain molasses from international markets or incentivize local procurement by offering competitive inter­national rates to the domestic producers. However, molasses exporters/sugar mills can­not be coerced by an abuse of statutory powers to facilitate PEMA members with cheap and affordable sugarcane mo­lasses; the entire exercise will surely be bad in law.

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