LAHORE, Jan 9: The Trading Corporation of Pakistan (TCP) has delayed payment of around Rs7 billion to sugar mills for 0.3 million tons of sweetener procured from the industry since November, which is causing cash flow problems for most factories, sources in the Pakistan Sugar Mills Association (PSMA) told Dawn on Wednesday.

“The industry is facing a deep financial crunch because of TCP’s failure to make timely payments against its purchases,” said a factory owner, who asked not to be identified.

The TCP, the miller said, was holding back even the bid bonds deposited at the time of opening of the tenders.

The government had assured the industry that the TCP would acquire 0.4 millions of sweetener from the mills to create a buffer stock if they commenced fresh harvest in November.

The industry had refused to begin crushing before end December unless its unsold stocks were allowed to be offloaded by stopping the TCP interference in the market.

The government also lifted the regulatory duty on export of the product to Afghanistan to facilitate the industry release its stocks and stabilise the domestic market.

The industry insists that the producers were forced to make “distress sales” because of the delay in their payments by the TCP.

The PSMA officials claim that the TCP was releasing its old stocks at Rs18,000 a ton, depressing the market sentiment and making the sweetener prices in the home market drop below the millers’ cost of production.

They say the TCP was delaying payments against its purchases in spite of the fact that the millers had completed all the required, tedious formalities.

The TCP is said to be acquiring fresh stocks from the mills at an average price of Rs25,000 per ton.

Another factory owner said on the condition of anonymity that the TCP was buying stocks directly from individual mills, allowing some big fish to undercut the price and sell more than the rest of the industry.

He pointed out that the sugar mills in the southern parts of Punjab were getting undue price advantage over the rest of the factories because of their better sucrose content recovery and lower production cost.

He suggested that the TCP should make all its purchases through the PSMA so that all the factories get reasonable orders according to their production capacities.

“Unless the TCP releases payments against its purchases, stops selling its old stocks at a price which is lower than our production cost and allows all mills equal opportunity to sell their stocks to it, the market sentiment and prices will remain depressed,” he said.