Is the economic turnaround worth it?

Bbabu,

Sugar very often does sit in India for 6-8 months sometimes even more. In India the sugar season runs from November to April in Northern India, from late October to May in Southern India. So effectively at the end of the crushing season (ie. May 31) there is a stock of a minimum of 5-6 months even in a year of bad harvest. In a good harvest year the stocks at end May can be as high as 10-12 months consumption.

There`s nothing anyone can do about and is not unique to sugar. It is true for all commodities which have seasonal production trends. The sugar which lies idle does not suffer any deterioration as it is not perishable. However the owner of the stock- the trader or the mills themselves- have to bear the holding cost including financing cost and storage charges. Usually they are compensated for this by higher sugar prices in the off-season.

As far as sugar prices in India and Pakistan are concerned the consumer pays a price in India of around Rs. 21/kg. This is because in India the ex-factory prices are close to Rs. 18-19/kg (well less than the imported parity price of Rs. 25/kg based on international white sugar prices of US$450-475 per MT and freight charges of US $50 or so) as the domestic stocks are sufficient and there are export restrictions so domestic ex-factory prices donot reach international price levels. To Rs. 18-19/kg you add another rs. 3 or so for inland freight, taxes and trade margins and you get final price of Rs. 21-22/kg. In Pakistan there is a shortage of sugar so necessarily the Pak prices have to mirror imported sugar prices- Rs. 25/kg (in INR terms) plus add tariff rates (I am not sure of duty) and the rest.

Regards

Urstruly #4

`` It all started in NS period when recketeers decided to make quick buck out of sugar market. They contacted the powers that be on the Indian side and devised this plan. The sugar production in India that year was below normal that year for some reason but it was still under manageable level. However, the powers that be in India created an artificial shortage. The INdian government allowed the import from Pakistan. The export and import groups constituting those racketeers were established on both side of the border who made tonnes of money in this exchange. Meanwhile, on Pakistani side the same racketeers created an artificial shortage of sugar and ``advised`` GOP to import the sugar from India to meet the shortage. Rumor has it that those train carriages that were sent to India earlier were not even emptied and returned back to Pakistan as they were. So the same racketeers made tonnes of money again. All this happened with in the span of 6-8 months, and those were the months when sugarcane is not grown in either side of the border. On Indian side where I assume that accountability is relatively more, the coverup was that since India had placed order with several other countries to meet the shortage, they received excess amount of sugar which was sold back to Pakistan. It wasn`t a new racket. The racketeers have been doing this since zia era with other commodities like tomatoes, onions, rice, wheat and someother. In NS era however, this racket reached the collosal proportions and theses crooks would have starved the people of pakistan to death had this attrocity not stopped by Kargil episode. So in the era of this topi/boot crooks the ``bilateral`` talks with Indians have bore ``fruit`` again and it is likely to continue cyclically until people come out with gluotines.``

Having sugar sit in India for 6-8 months is silly. It is a loss of a huge amount of money.
You cannot do similar schemes with onions, tomatoes. They rot within a few weeks.

Only scheme I can see is that urban middle class consumers of India can pay more for the sugar than a poor person in Pakistan. That would enrich the producers and sellers of sugar in Pakistan.

I must expound on Zeemax`s GUNNa theory. He has actually told half of the story. The rest is as follows;

It all started in NS period when recketeers decided to make quick buck out of sugar market. They contacted the powers that be on the Indian side and devised this plan. The sugar production in India that year was below normal that year for some reason but it was still under manageable level. However, the powers that be in India created an artificial shortage. The INdian government allowed the import from Pakistan. The export and import groups constituting those racketeers were established on both side of the border who made tonnes of money in this exchange. Meanwhile, on Pakistani side the same racketeers created an artificial shortage of sugar and ``advised`` GOP to import the sugar from India to meet the shortage. Rumor has it that those train carriages that were sent to India earlier were not even emptied and returned back to Pakistan as they were. So the same racketeers made tonnes of money again. All this happened with in the span of 6-8 months, and those were the months when sugarcane is not grown in either side of the border. On Indian side where I assume that accountability is relatively more, the coverup was that since India had placed order with several other countries to meet the shortage, they received excess amount of sugar which was sold back to Pakistan. It wasn`t a new racket. The racketeers have been doing this since zia era with other commodities like tomatoes, onions, rice, wheat and someother. In NS era however, this racket reached the collosal proportions and theses crooks would have starved the people of pakistan to death had this attrocity not stopped by Kargil episode. So in the era of this topi/boot crooks the ``bilateral`` talks with Indians have bore ``fruit`` again and it is likely to continue cyclically until people come out with gluotines.

Re: # 1
``As for your question ``Will there be an end to this?`` The answer is, only if you kick out the topi/boots. ``

So are you saying that things were wonderful when Benazir or Nawaz were there. Hooray for democracy. Weren`t we bankrupt in those times.

Zeemax,

My seal of approval is for your GUNA theory i.e sugarcane theory. It is not a theory but a fact. We are sugarcane growers from Shiekupura.

haideri

The Sugar Story:

In 1998/1999, sugar stocks were so much in excess of demand that prices were in danger of plummeting and the mills were in for huge losses. So the NS government gave permission of exports to India and since stocks were too high, export quotas were awarded to mills because India would only buy the amounts it needed and not more. But that was 1998/1999.

After the topi/boot goons came to power, they reversed the sugarcane support price structure in favour of the mills and the mills started blackmailing the growers to either sell at their preferred rates or not at all. Since the government itself was not the buyer at the support price anymore, the farmers had no choice. Even then they had difficulty in getting the payments from the mills. In 2004/2005, there were riots, violence, and sit-ins at the mills doors by the growers. Many of them are still not paid.

The obvious result: Sugarcane growers switched to other crops in the next season, and the ones who still grew it, switched to manufacturing crude sugar and `guRh` for export to Afghanistan rather than selling to the mills. Sugarcane prices shot up and therefore the sugar crisis in this year. Next year will be worse.

The electricity (KESC) story:

Before KESC was privatized, it was run by WAPDA and KESC jointly. The total additional peak load is just 41 MW more as compared to the peak of 2005 i.e. before privatization. However, after privatization in Jan 2006, power was available for only about half a day in most parts of Karachi beginning from March till recently. The situation alleviated somewhat after WAPDA made special arrangements to sell an additional 150 MW to KESC from the Punjab share. So what happened between March 2005 and March 2006?

What happened was simply that the government sold this vital public utility for a song to a bunch of stock-market racketeers.

There are two ways to privatize. Either you sell it on the stock market to any number of buyers at the market determined rate, and then let the board hire the management to run it, OR you look for strategic investors who know the business and can actually run and expand it.

Pakistan did a hybrid. It first let the racketeers pick up the entire 25% existing float of KESC at the stock exchange for Rs. 1.60 per share, then invited bids from strategic investors. Two previously unknown `Saudi` companies were the highest at Rs. 12 per share and Rs. 5.60 per share. The top one was awarded the letter of intent. However that `top` bidder defaulted on the next instalment and according to the rules, the next highest at less than half the original price had to be chosen.

So far, so good. Now when the LOI was awarded at Rs. 12 per share when the going rate was Rs. 1.60 per share, the price of that existing 25% shot up which was conveniently off-loaded to the public at ten times the price. However, when the default took place and the next bid was just Rs. 5.60, the price crashed back and was bought back by the SAME individuals. Even though just 51% is required for control, the bidders ended up with 72% of the company because they got the extra shares for free plus some. It doesn`t need to be explained that the highest and the second highest bidders were the same parties.

So who owns KESC? On paper it is a consortium of a Saudi non-energy company which owns about 12%, with the balance owned by a Cayman Islands off-shore company of nominal capital with 22 corporate directors ... i.e. more companies. Noone can establish who are the real beneficial owners of KESC. But it is an open secret for many.

That off-shore company and the Saudi frontman do not know anything about the energy business, so they gave a `management` contract to Siemens to completely run the business on their behalf for a cut in the profits. First thing Siemens did was to cut the payrolls of staff by eliminating payments for overtime, so internal sabotage began. These are technical trained staff and can`t be replaced easily, so the tug of war continues. The additional cost of buying electricity from WAPDA is distributed in bills of large users. There can`t be any investment in infrastructure improvement either expected from these racketeers because why would they want to sink further in this quicksand? They would rather make a quick buck and get out.

So that`s the story. Who are these individuals? Suffice to say these are the same people who engineered the stock-market crash of March 2005 in which US$ 18 billion was wiped off the market cap and ended up in their pockets, and thereafter they started picking up industries in privatizations like Pak-American fertilizer, KESC, and even Pakistan Steel, which was stopped by the Supreme Court, I don`t know on whose orders. But they almost got the only steel mill in Pakistan as well.

As for your question ``Will there be an end to this?`` The answer is, only if you kick out the topi/boots.

Rgds

P.s. HamidM/tahmed 32, this is not a conspiracy theory. Promise. You can check my facts.