The State Bank of Pakistan (SBP) has implemented stringent measures for the export of sugar, linking it to the 100 percent receipt of export proceeds in advance through a banking channel. This directive comes after the Economic Coordination Committee (ECC) of the Cabinet approved the export of 150,000 metric tons (MT) of sugar during its meeting on July 13, 2024. The Ministry of Industries and Production formalized this approval by issuing Office Memorandum (O.M) F. No.1(6)/2022-23-CAO on June 26, 2024.
According to the SBP’s guidelines, the banks will ensure that 100 percent of the export proceeds are received in advance from the foreign buyer through the normal banking channel before the shipment takes place. This requirement is based on a valid sales contract. Banks, known as Authorized Dealers (ADs), must also obtain proof of quota allocation by the respective Provincial Cane Commissioner and keep a record of the same. Additionally, ADs will secure an undertaking from the exporters that the consignment will be shipped within 45 days from the date of quota allocation.
The SBP has mandated that ADs submit weekly updates on sugar export transactions and shipments to the Director of the Foreign Exchange Operations Department (FEOD) at the SBP Banking Services Corporation (SBP-BSC) Head Office in Karachi. These updates must follow a specific reporting format and be submitted every Friday.
The SBP has instructed banks to inform all their constituents of these new guidelines and ensure meticulous compliance. Furthermore, as part of the export conditions, the Pakistan Sugar Mills Association (PSMA) must provide an undertaking that the ex-mill prices of sugar will not exceed Rs.140 per kilogram. The ex-mill and market prices of sugar will be monitored by the Provincial Authorities to ensure stability.
The benchmark retail price for sugar will be taken from the Sensitive Price Indicator (SPI) as of June 13, 2024, with an additional margin of Rs.2.00 per kilogram. The Sugar Advisory Board is responsible for monitoring sugar prices regularly, at least on a weekly basis. If the retail price of sugar exceeds the benchmark price plus Rs.2.00 per kilogram, the Sugar Advisory Board will immediately revoke the permission to export.
All proceeds from the export of sugar must be utilized to clear payments to farmers and growers. Provincial authorities will monitor the clearance of these payments and report to the Sugar Advisory Board. In case of any violation of the stated terms, the export of sugar will be halted immediately.
The Ministry of Industries and Production will ensure that the export quota for sugar is distributed among the provinces based on the current year’s actual production. This measure is intended to maintain a fair and equitable distribution of export opportunities across the country.
These stringent measures by the SBP and the Ministry of Industries and Production are designed to stabilize the sugar market in Pakistan and protect the interests of consumers and farmers. By linking sugar export to 100 percent advance payment, the SBP aims to ensure that the proceeds from sugar exports are received in full and utilized appropriately. This approach also seeks to prevent any potential price manipulation in the domestic market.
Moreover, the monitoring and compliance requirements set forth by the SBP and other relevant authorities are expected to foster transparency and accountability within the sugar industry. By keeping a close watch on ex-mill and retail prices, the government aims to prevent any undue price hikes that could burden consumers.
