Sugar mills have warned of closing production prematurely since producing and selling sugar at a loss had become financially unsustainable and unable to meet the current season’s targets without risking massive operational losses.
According to a spokesman for the Pakistan Sugar Mills Association (PSMA), the sugar industry in Pakistan has been in crisis for years and was forced to conduct business in an environment where the minimum fixed price of sugarcane was fixed by provincial governments and mills were forced to sell sugar at gloomy rates to facilitate consumers.
The spokesperson said the mills were forced to sell sugar below production costs to help the government meet its working capital requirements.
Current sugar prices have been impacted negatively by leftover stock from the previous season as a result of low exports against a surplus of one million metric tons valued at $1 billion and unnecessary restrictions imposed on the inter-provincial movement of sugar to provinces facing shortages.
Despite repeated demands, the government did not intervene or allow the Trading Corporation of Pakistan (TCP) to export/purchase sugar stockpiles for building strategic reserves.
The spokesperson said sugar mills were already facing a liquidity crisis due to issues such as credit line restrictions and spikes in markup rates, wages, imported chemical prices, and transportation expenses over the last two years. Sugar production costs have risen dramatically, while the ex-mill price has fallen far below the cost of production.
The association lamented that production and sale of sugar below its real market value have become increasingly unviable and unsustainable for the sugar industry to continue the current crushing season without losing big, and such problems can force the industry to halt operations.
PSMA has urged the government to intervene and prevent the sugar industry from closing as rising operational costs wreak havoc in the sector.
