The State Bank of Pakistan (SBP) has directed banks to process export cases submitted by eligible sugar mills for a total quota of 200,000 metric tonnes, subject to prescribed payment, shipment and reporting requirements. The instructions follow the federal government’s decision to permit sugar exports and the subsequent finalisation of operational procedures for implementing the allocated quota among eligible mills.
The Economic Coordination Committee (ECC) of the Cabinet approved the export of 200,000 metric tonnes of sugar in September, subject to specified terms and conditions. Following the ECC decision, the Ministry of National Food Security and Research, in coordination with the Pakistan Sugar Mills Association (PSMA), finalised the operational modalities for implementing the export quota and determining the allocations available to individual sugar mills.
Under the SBP’s instructions, Authorised Dealers will process export requests from eligible sugar mills according to the mill-wise quotas allocated by the PSMA. Banks have also been instructed to ensure that requests for issuance of financial instruments by exporters correspond with the quotas assigned to their respective mills. This requirement links the processing of export transactions directly to the allocations determined under the approved quota mechanism.
The central bank has specified the payment arrangements under which the sugar exports can be processed. Exports will be permitted only against sight letters of credit or advance payments. In addition, shipments covered under the quota must be transported exclusively through sea routes. These requirements form part of the conditions banks are required to follow while processing the export transactions of eligible sugar mills.
The SBP has not set a specific deadline for completing the shipments under the export quota. However, where exports are made against letters of credit, the proceeds must be realised within the regulatory period prescribed by the central bank. Banks will therefore remain responsible for ensuring that export transactions comply with the applicable foreign exchange and proceeds realisation requirements.
Banks have also been directed to submit information to the SBP regarding sugar export transactions and shipment updates on a weekly basis. The required information must be provided in the prescribed reporting format by 4pm every Friday. The reporting requirement will allow the central bank to receive regular updates on transactions processed under the 200,000-metric-tonne quota and the progress of related shipments.
The SBP has further instructed banks to conduct due diligence on all relevant export transactions. Authorised Dealers are required to satisfy themselves regarding the bona fides of their clients and the underlying transactions in accordance with applicable regulations. This places responsibility on banks to review the transactions before processing them under the sugar export framework.
The total 200,000-metric-tonne quota has been distributed among 79 sugar mills across Pakistan’s provinces. Individual allocations have been determined based on the quantity of sugarcane crushed by each mill. The SBP’s latest instructions provide banks with the operational framework for processing exports against these mill-wise allocations while requiring compliance with payment, shipment, reporting and due diligence conditions.
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