The News - July 19

Short of Sugar

As the holy month of Ramadan approaches it would be inconsistent if somewhere somebody had not manufactured a crisis related to a vital commodity that will affect all and sundry. This year it is to be sugar that may be the crisis of choice, with the more pessimistic of pundits predicting that its price may rise to Rs100 or more per kilo. The tale is one of good intent gone bad and calls into question the competencies of those at the top of the Trading Corporation of Pakistan (TCP). It appears that the $50 million contract that the TCP made with a Chinese import company for 100,000 metric tons of the sweet stuff may not be fulfilled despite their having been granted an extension of the deadline for the first delivery. Do not for one moment deceive yourself that the sugar is en-route from China because it is not; it is coming from South America, Brazil to be precise, and our embassy there has confirmed that the port from which the sugar is to leave is congested and delays are likely. So how has the TCP got itself – and us – into this bitter-sweet tangle?

Perhaps the first thing to understand is that there is no Plan B, and the government is in a bit of a tizzy as there is no secret stock of sugar which may be fed into the markets to prevent a shortfall. An unintended consequence is almost certain to be a ballooning of local prices and the hoarding of what stocks there are. The chairman of the TCP has called an emergency meeting for Saturday, the outcome of which we are as yet unaware, but during which he is expected to cancel the contracts awarded to Yunnan and Sadat and further seek damages from them for their failure to fulfil the order. The Chinese had won the order after putting in a tender so low that it practically gave a heart attack to our indigenous sugar importers and a $50 million credit line was opened to them through the National Bank of Pakistan. Had the deal come off we might have saved ourselves as much as $10 million on a single contract. The Chinese may lose the $1 million earnest money that they deposited but the sugar, if it ever arrives, is going to be costly; certainly more than the $488 per metric tonne that was quoted against a market rate above $700 per metric tonne. That a figure so far below the market rate was accepted as credible by the TCP and, what is more, accepted from an importer who has previously defaulted, makes one wonder if there may be a few fake economics degrees held by the directors of the TCP. We now await the reports of pre-shipment inspection companies, but the word circulating in official circles is that the TCP, via a basket of failed contracts, has incurred losses of Rs4.5 billion. And the sugar? Still in Brazil.

Source : http://thenews.jang.com.pk/print1.asp?id=251630