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Ukraine: Cabinet of Ministers will consider reduction of minimal sugar price to US$379/t on October 23
Ukrainian Cabinet of Ministers on October 23 will consider a draft resolution about reduction of mandatory minimal purchasing price for sugar.
The document stipulates modification of the Cabinet of Ministers' resolution of February 15 2002, which is to be supplemented by the following sentence: "Sales of sugar within the frontiers of volumes, distributed by the Ministry of Agrarian Policy in accordance with the established quota of sugar deliveries to the domestic market, shall be effected in the period from November 1, 2002 till December 31, 2002 at the minimal price of UAH2,050 [$379.6] per tonne including VAT."
According to the explanatory note to the draft resolution, the prior mandatory price, established by the Cabinet - UAH2,370 ($438.8) per tonne - was formulated, stepping from minimal sugar price of 2000 (UAH2,000-$370.3 per tonne), actual index of inflation (in 2001 - 106.1 percent) and forecast index of inflation for 2002 (109.8 percent). However, the actual index of inflation over the eight months of 2002, according to State Statistics Committee, equalled 96.5 percent. Thus, taking into account the actually formed index of inflation, the minimal price of 1 tonne of sugar must be UAH2,000 x 1.061 x 0.965 = UAH2,048 (including VAT).
Review of the minimal price has been necessitated by the currently formed situation in sugar market, when sugar plants have been unable to sell the produced sugar at the established by government prices.
This has been caused, according to specialists, by private entrepreneurs' and individuals' sugar sales at prices, lower than those established by the Cabinet, by smuggles of sugar to Ukraine an by a seasonal overgrowth of supply over demand. Other important factors are absence of means for creating and financing sugar interventional fund, inability of low-enforcement authorities to provide control over observing the minimal price by market participants and absence of mechanism for privileged long-term financing of producers.