Pakistan is using letters of credit (L/Cs) in its strategy to help the country's beleaguered sugar industry and boost foreign earnings.

The country currently has a glut of sugar while cheap imports are pushing prices down substantially.

L/C requirement

As a result, the government has authorised the export of 500,000 tonnes of sugar and imposed a 20 per cent regulatory duty on imports to facilitate the industry's cash flows and earn foreign exchange.

Exporters however will be required to sell sugar only on irrevocable L/C terms or on a firm contract with a 15 per cent non-refundable advance payment.

Under pressure

Sellers must ensure shipments of sugar are made within 45 days after a contract is registered and the 500,000 tonnes quota must be exported by 31 March 2015.

The government appears to be bowing to pressure from a delegation from the Pakistan Sugar Mills Association (PSMA) which recently lobbied ministers for permission to export and impose 25 per cent duty on imports.

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