Sugar mills lobby to continue import restriction againIn a public notice issued on Sunday, Nepal Sugar Mills Association said that the domestic sugar production is expected to hover at 190,500 tonnes this sugarcane crushing season that is likely to end in mid-May.
Domestic sugar mills said they would be battling a glut in production in the next fiscal year and have started putting pressure on the government to continue the quantitative restriction on sugar imports imposed last year.
In a public notice issued on Sunday, Nepal Sugar Mills Association said that the domestic sugar production is expected to hover at 190,500 tonnes this sugarcane crushing season that is likely to end in mid-May. And if the remaining stock of last year’s is taken account, they would have altogether 267,042 tonnes of sugar.
“And based on annual sugar demand of 250,000 tonnes, the mills still will have a surplus stock of 20,000 tonnes,” the association said in a notice.
Last September, the government bowed to pressure from the sugar mills and imposed an import quota on 100,000 tonnes of sugar annually.
As the government has hinted to lift the restriction, sugar mills are worried that they may have to compete with imported sugar that could be available at the cheaper rate in the market, said Madhav Timilsina, president of Consumer Rights Investigation Forum.
“The sugar mills have been duping the government as they imported sugar and stocked it in the warehouse. Then they started to lobby the government to impose the imports restriction,” he said.
“Immediately, after the restriction, they were able to sell the stocked sugar at higher rates taking a huge profit margin,” said Timilsina. “This episode is going to repeat again.”
Two weeks ago, Prime Minister KP Sharma Oli had expressed dissatisfaction over the sugar producer’s lobbying to increase sugar price after the government imposed the quantitative restriction. He said that the sugar mills cheated the government to increase the market price.
The imports restriction had allowed mills to increase the sugar price to Rs90 per kg, from Rs60 last year.
According to an industry insider, the government will remove the restriction and allow powerful traders to import sugar that is available at a cheaper rate.
“After the sugar is imported, the sugar producers then will lobby to restrict import again. This will allow traders to increase the domestic price and make a big profit.”
Rajesh Kedia, general secretary of the association, said if the government lifted the import restriction, they would be left with a large amount of unsold sugar. “It can lead to the closure of a number of sugar factories if they are unable to sell their product.”
The sugar producers have been pressing the government also to increase the import duty on sugar to 60 percent from the existing 30 percent.
The 56th annual audit report published by the Office of Auditor General has said that increasing the import duty to 30 percent from 15 percent did not help to reduce imports.
Kedia, however, said that if the government did not raise the import duty, it would create an adverse effect on the domestic producers. Sugar producers said that the cost of production of sugar has increased by Rs2.30 per kg to Rs72.65 per kg this year.
They claimed that they have been compelled to sell the product at Rs71.19 per kg in the market, incurring losses.
“This will cause a loss of Rs2.25 billion to sugar producers this year,” said Kedia, adding that they would not be in a position to pay the sugarcane farmers on time this year too if they are left with a large amount of sugar stock.
Sugarcane farmers, on the other hand, said the sugar factories were yet to clear their past dues. “We are yet to receive outstanding dues of Rs300-320 million of last year’s harvest,” said Kapil Muni Mainali, president of Nepal Sugarcane Producers’ Association.
According to Mainali, the farmers have almost sold out their crop this season to the factories. “But they have been paid only for the crop supplied as of January end,” said Mainali adding that only few sugar mills have paid the farmers as per the price that the factories agreed with the government. This fiscal year, the government had fixed the floor price of sugar at Rs556 per quintal. “However, many sugar factories reduced the price by Rs5-7 per quintal than the one fixed by the government,” Mainali said.