SBP issues quota-based sugar export mechanism

KARACHI: The State Bank of Pakistan (SBP), following instructions from the government, has issued a mechanism for the export of sugar and advised banks to process export cases in accordance with the allotted quota.

On January 18, 2023, the Ministry of Commerce allowed the export of 250,000 metric tonnes of sugar by sugar mills.

In a circular released late on Friday, the SBP directed banks to process the cases regarding the allocation of sugar export quotas for the provinces of Punjab and Khyber Pakhtunkhwa.

“The authorised dealers (ADs) will forward the requests of sugar mills through their respective Group Heads to the Director, Foreign Exchange Operations Department (FEOD), SBP-Banking Services Corporation (BSC), Head Office, Karachi for approval quoting the reference of this circular letter along with the copies of the banks (duly attested by the bank),” the SBP said in a circular.

As per the mechanism, mills must provide a sugar export contract and clearance certificate issued by the concerned cane commissioner to the effect that the concerned sugar mill has cleared outstanding dues of the farmers for sugarcane crop up to 2021-22.

Printout of the electronically generated financial instrument for export through Pakistan Single Window (PSW) will also be needed, it said.

The FEOD will allocate sugar export quota to the sugar mills on a first come first served basis, based on the date/time of the case received through the SBP regulatory approval system.

The export by the sugar mill will strictly be made through the bank that has submitted the request for quota allocation, according to the circular.

There will be no subsidy by the federal or provincial governments for export under the above scheme, the SBP said and added that banks will ensure to obtain irrevocable letters of credit (LC) from the buyer.

In addition, the export proceeds will be realised within 60 days of the opening of LC. While calculating a period of 60 days, both days of LC opening and realisation will be included.

The bank will ensure that export by a sugar mill does not exceed the quota allocated to it and there will be no provision of surrendering, transferring, or amending the quota once allocated by FEOD, the SBP said.

The quota for sugar export for the province of Sindh will be allocated by the cane commissioner of the province, it added.