950807

Banks told to

recover loans

from sugar

mills by Aug 31

ANWAR RAJANI

KARACHI: Loans worth over Rs.1000 million obtained by sugar mills in the country, have to be repaid by the mills to the banks within about three weeks.

According to rough estimates, Rs.1000 million is outstanding against 64 mills all over the country. The mills managements had obtained loans for working capital.

The State Bank of Pakistan on Monday directed all the commercial banks to call back the loans given to the sugar mills for working capital needs. Banks have been asked to implement this decision by Aug 31 and inform the State Bank accordingly.

The State Bank has taken this decision in order to curb the hoarding of sugar. For quick repayment of loans, the millowners will have to unload their stocks in the market and consequently, the prices, which have gone up recently, will come down to a reasonable level.

Market sources are, however, of the view that the purpose of the SBP directive will not be served because, according to them, the stocks of sugar cannot be sold immediately.

At present, about 800,000 tons sugar is lying in the premises of the mills. The total value of this stock, calculated at the ex-mill price of Rs.14 per kg, comes to about Rs.1,1200 million. This figure also includes the payment of excise duty which comes to about Rs.1680 million.

After deducting excise duty, the amount that would remain with the mills would be Rs.9,520 million. Out of this, the loans of over Rs.1,000 million are required to be repaid by the managements of the mills.

At present, the working capital loans obtained from banks are still being utilised by the mills on the payment of quality premium to the growers, wages to the staff and maintenance expenses. Mills are to be kept ready for the next operation of sugarcane crushing which is to start by the middle of October next.

It may be mentioned here the price of sugar has gone up in the local market and had recently touched the figure of Rs.17 per kg. Therefore, the government immediately allowed duty-free import of sugar to bring down the prices.

Market sources, however, contend that the duty-free import or the SBP's step to recover loans will have little effect on the price, as according to them, neither sugar can be imported so soon nor loans can be repaid immediately.

Sugar price in the world market is being quoted at 425 dollars per ton. It cannot be imported at this price, sources said.

If imported by the government at this rate, then the commodity will have to be sold at subsidized rate.