State sugar mills seek ways to clear stock

State-run Bangladesh Sugar and Food Industries Corporation (BSFIC) has urged the government to increase import duty on the sweetener to curb import and clear its unsold stock of 1.51 lakh tonnes, corporation and revenue officials said.

The corporation comes with the plea as it is planning to start crushing sugarcane by the end of next month with the hope to produce 1.2 lakh tonnes of sugar in 2018-19.

The agency, which runs 15 mills, said it cannot sell its sugar as wholesale prices have fallen below its mill gate price of Tk 50 per kilogramme in recent weeks, said the officials.

At the wholesale level, the sweetener refined by private processors, is sold at Tk 44-45 each kg now, according to BSFIC Chairman AKM Delwer Hussain.

Retail prices of sugar declined 8.7 percent year-on-year to Tk 50-55 each kg in Dhaka now, according to data from the Trading Corporation of Bangladesh.

If the current prices prevail, the agency will continue to incur losses and be unable to buy sugarcane from growers in the next crushing season.

“We are facing a fund crisis as we cannot sell sugar,” he said, adding that state mills depend on locally grown sugarcane to produce sugar and farmers tend to shift to other crops when prices are low.

Sugarcane acreage almost halved in two and a half decades to 2.33 lakh acres in 2016-17 as farmers are getting reluctant to grow the crop that takes more than a year to mature but brings lower returns compared to other crops.

“Farmers will not grow sugarcane if we cannot sell sugar at fair prices and provide attractive prices to growers,” said Hussain, explaining BSFIC's position in favour of duty hike.

The corporation imported 1 lakh tonnes of sugar last year to boost its stock and help the government keep prices stable.

In its latest plea, the BSFIC called upon the government for increasing specific duty on raw sugar to Tk 4,000 per tonne from existing Tk 2,000 and imposing 25 percent supplementary duty apart from maintaining present VAT and regulatory duty.

The hike will push prices of refined sugar to over Tk 57,000 per tonne, according to the BSFIC proposal.

The corporation also demanded hike in duty of white sugar to discourage imports of the sweetener.

“We are examining the proposal. Decision will be taken based on discussion with the high-ups,” said a senior official of the National Board of Revenue (NBR).

Hussain said the BSFIC mills once produced 2.70 lakh tonnes of sugar. Its production slumped over time for a dearth of sugarcane in the face of falling cultivation.

“The existence of state sugar mills depends on the cultivation of sugarcane. We have hiked sugarcane purchasing prices in three phases recently to encourage farmers to grow the crop,” he said.

He said mills would be able to reduce per unit production cost if they get required amount of sugarcane.

Import of raw sugar rose 20 percent year-on-year to 26.15 lakh tonnes in 2017-18, according to Bangladesh Bureau of Statistics (BBS).

Tanvir Hydar Pavel, director for finance and commercial at City Group, which runs the largest sugar refinery, said prices will rise for the duty spike.

"Consumers will have to spend more to buy sugar. The government should consider whether it can provide support to state mills through any other ways," he said.

In May this year, the US Department of Agriculture (USDA) estimated Bangladesh's sugar consumption at 26.95 lakh tonnes in 2017-18, up 20 percent from 22.32 lakh tonnes in the previous year.

It forecasted that total consumption would rise 10 percent to 29.80 lakh tonnes in 2018-19.

The nation has to meet more than 95 percent of its sugar requirements through imports, according to BBS data.