ISLAMABAD (June 22 2009): The government has decided to use State Bank of Pakistan (SBP) to start action against sugar millers for release of stocks aimed at bringing down sugar prices in the domestic market being manoeuvred by the millers, official sources told Business Recorder.

"SBP will take urgent action to ensure that sugar mills start releasing their stocks in the market immediately," sources quoted Advisor to Prime Minister on Finance, Shaukat Tarin, as directing the central bank in the last meeting of the Economic Co-ordination Committee (ECC) of the Cabinet.

Sources said that the decision was taken in the backdrop of post-budget press briefing which extensively covered the review of key indicators. The ECC expressed satisfaction over the prices. However, increase in sugar prices was viewed with extreme concern and action for release of stocks held by the millers was urged.

According to sources, ECC members were apprised that the government has concrete information of hoarding and cartelisation by the sugar millers and now action was necessary against them immediately. "Most of the sugar millers have connections with politicians, both from treasury and opposition benches. That\'s why no action has been initiated against them previously," said one official in the ECC meeting.

Sugar prices at retail level range from Rs 47 to Rs 48 in different parts of the country and Pakistan Sugar Mills Association (PSMA) has urged the government to procure sugar from millers rather than go for import, which is expensive. A delegation of PSMA, headed by its Chairman Iskandar Khan also met Governor, State Bank, a couple of days ago and was hopeful that the issue of repayment of loans and advances would be resolved amicably.

SBP has set the deadline of July 31, 2009 for clearance of loans and advances taken against sugar stocks to discourage hoarding of sugar. According to PSMA, local mills have enough sugar to cater for the country\'s entire year\'s demand.

There is no shortage of sugar in the domestic market; therefore, instead of importing 200,000 tons of expensive sugar that would deplete Pakistan\'s foreign exchange by $100 million, sugar should be procured from the domestic industry. As SBP is concerned with the rising trend in the price of sugar, PSMA has provided documentary proof that because of high cost of sugarcane ie Rs 130 per 40 kg (70 percent of the sugar production cost is the cost of sugarcane), coupled with high interest rate are the factors that have increased the prevailing sugar prices.

Eskandar, while talking to Business Recorder, said that the government should procure sugar at Rs 45 per kg from PSMA and help mills to pay back their loans and advances to the SBP.