KARACHI, Feb 11: Despite the fact that unsold stocks of over 1.5 million tons are presently lying with sugar mills and current crushing season was still in progress , the prices of refined white sugar in the open market scrambled to Rs28 per kg from Rs22 per kg recorded early last month.

"It was only because of market sentiment that prices of white sugar in domestic market spurt in the middle of last month which forced government to take such a drastic measures of allowing duty free import of sugar," sugar analysts told Dawn over telephone.

Even sugar production figures strongly vindicate that there would be no shortage of the produce because up to January 31, 2005 the country produced 1.900 million tons of white refined sugar which was only less by a meagre quantity of around 28,000 tons with the corresponding period last year when production stood at 1.928 million tons.

According to estimates the country would require around 3.6 million tons of sugar for domestic consumption during current season but was expected to produce around 3.4 million tons, including 1.4 million tons expected to be produced during remaining period of current crushing season.

It is also being strongly argued that after adding reserve stocks of around 0.377 million tons held by the Trading Corporation of Pakistan (TCP) and around 0.300 million tons presently in the open market (held by retailers or wholesalers) the country could easily witness smooth sailing for the current season, analysts said.

The production figures of sugar for current season further disclose that up to January 31, 2005, the sugar mills sold around 757,007 tons of sugar in the open market, and are presently holding around 1.144 million tons of unsold stocks. After adding TCP's reserve stocks of around 0.377 million tons total unsold stocks in the country would come to around 1.545 million tons.

Iskander Khan, vice chairman All Pakistan Sugar Mills Association (APSMA) told Dawn over telephone from NWFP with current crushing still going on the industry is expected to produce 1.3 million tons more sugar during next two months.

He further said that due to heavy rains for last ten days most of sugar mills in Punjab and NWFP have stopped crushing because haulage of cane from farms to mills was not possible.

"I am not ready to accept that the country was going to face sugar shortage and was of a firm opinion that current price hike was based on market sentiment and not on bare facts of statistics. A similar situation was also witnessed in wheat though later the government allowed its import," he added.

Undoubtedly the government decision to allow duty free import of sugar has a positive impact on domestic prices which started coming down but it was equally important to note that sugar prices in the world market began to rise immediately after government announcement, Iskander Khan maintained.

Inquiries from Pakistani importers for sugar in the world market pushed prices by $20 per ton in a short period of ten days and are now being quoted at around $320 per ton. After calculating the landed cost (c&f) Karachi, he said would come at around Rs24 per kg and after adding inland freight it would rise further.

According to market reports three to four importers have already opened their L/Cs for import of around 250,000 tons of raw sugar. However, some analysts question government wisdom for allowing raw sugar import up to 600-ICUMSA which could be without further processing by commercial users.

It would have been better the threshold of 1000-ICUMSA should have been fixed because this would have not allowed importers to directly place it in open market but would have needed further processing.

Iskander Khan said, "according to industry estimates total sugar production in Punjab would stand at around 2.3 million tons, Sindh 850,000 tons and NWFP 150,000 tons which would take total sugar production for current season to around 3.4 million."

But there was no denial of the fact that sugar prices in the open market surged so high that poor masses were unable to afford the cost. Presently both the industry and wholesalers are putting blame of profiteering on each other because retail prices which stood at Rs22 scrambled to Rs28 per kg and ex-factory prices from Rs18 to Rs25.

The vice chairman APSMA suggested that the government should give more incentives to growers so that installed capacity of sugar industry of 5.5m tons could be fully utilized on higher availability of sugarcane. He said by doing so a huge quantity of 2m tons could be exported.

He said with the withdrawal of subsidy by the West on its farm produce which stands at around $350bn per annum country's like Pakistan would also be in a position to market their surplus farm products in the world market.