PRICE OF REFINED SUGAR

Mr Yeo Toon Chia: To ask the Minister for Finance what are the reasons for the prevailing high price of refined sugar and whether it will be reduced in the near future.

Mr Yeo Choo Kok: Mr Speaker, Sir, Question No. 10.

The Minister for Finance (Mr Hon Sui Sen): Mr Speaker, Sir, sugar prices often fluctuate rapidly on the world market. To ensure uninterrupted supplies of raw sugar and to help maintain a stable domestic selling price for refined sugar, the Sugar Industry of Singapore has had to enter into long-term supply contracts. The current long-term contracts with Australia and Fiji, concluded towards the end of 1974, assured us of raw sugar supplies fully for 1975 - 77 and thereafter up to 85% of our domestic requirements until 1980. The contracted price at S$689 per metric tonne was then extremely favourable compared with the prevailing market price of about S$2,580 per metric tonne.

Thus, the Sugar Industry of Singapore was able to maintain the domestic retail price of refined sugar at 75 cents per kati since 1974 to date. Otherwise, Singapore consumers would have had to pay as much as $2.25 for their kati of sugar if we had to buy on the open market at the peak of world price fluctuations. Taking the period between 1974 and now, the price paid by our consumers on the average is about 24 cents per kati lower than the average world price of white sugar.

Members are no doubt aware that the price of raw sugar on the world market has fallen. The price of sugar paid under the current contract, however, has increased because of the escalation index tied to prices paid by the Australian sugar industry. The Sugar Industry of Singapore is at present trying to discuss with Australia some improvements in the terms of the contract. Apart from a lower price, it would be desirable that the new contract should enable us to diversify our sources of supply, especially to buy from other ASEAN countries.

Since the Sugar Industry of Singapore is making a loss at prevailing prices, I have no proposals at present to ask SIS to make any revision of the price downwards, If necessary, I will consider whether the Sugar Industry of Singapore may be allowed adjustments to the domestic retail price of sugar when discussions are completed. However, any adjustments made will have to take a long term view of the market rather than to follow the erratic movements of world sugar prices.

Mr Ivan Baptist (Potong Pasir): Mr Speaker, Sir, may I ask supplementary questions? First, why did we not attempt to re-negotiate the agreement very much earlier when we knew that world prices were dropping? Second, we had a price escalation clause. Why did we not negotiate for a price reduction clause? Third, I believe Malaysia retails their sugar at 65 cents a kati and we have the same sort of contract with the countries mentioned by the Hon. Minister. Why is that so? Why are we retailing our sugar at 75 cents a kati? Fourth, why did we not have the foresight to realise that the sugar prices could have dipped and so have a shorter term instead of that long-term contract?

Mr Hon Sui Sen: Mr Speaker, Sir, the answer is simple. The Sugar Industry of Singapore made a commercial judgment and decided that a long-term contract was desirable. Therefore, it entered into the terms of the present contract. At that time, of course, it was favourable. As I have said, the price was then very low. The escalation clause was built into the contract, because this was related to the cost of labour in Australia. The intention was that the long-term contract would enable Australia to expand their growing of sugar cane and that the price would be sufficient to enable their growers to pay their labour at the expected escalation in wages which would result in the following years. There was no possibility of a reduction in price downwards because of the nature of the contract.

The reason why we are paying 75 cents in Singapore instead of 65 cents as in Malaysia is that we kept the excise tax at a level which we have always been charging, that is, 10 cents, while the Malaysian Government thought it possible for them to waive the tax altogether. That is the reason for the difference between their price and our price. I think I have answered all the questions.

Mr Ivan Baptist: A further supplementary question. Mr Speaker, Sir, what will be the effect on the price of sugar in Singapore as a result of the ban on saccharine in the United States?

Mr Hon Sui Sen: Mr Speaker, Sir, I would think that the tendency would be upwards. Of course, there are other factors in the world sugar market which decide the price from time to time. Some of these are what prices are being negotiated, the effect on growers. that is, whether they grow more sugar cane, and also the effect of the new processes of making liquid sugar of a different kind, not cane sugar but from wheat and corn. All these have an effect on prices. If anyone can tell me whether the price is going upwards or downwards, I would be very pleased. I am sure the Sugar Industry of Singapore will also be very pleased if anyone can give a guaranteed forecast of prices over the next five years.

Mr S. Dhanabalan (Kallang): Mr Speaker, Sir, a supplementary question. If the Minister is satisfied that an increase in the price of sugar has to be allowed in order to enable SIS to cover its costs and make a marginal profit, would he consider a reduction in excise duty first, so that the price of such an essential commodity like sugar can be maintained at present levels?

Mr Hon Sui Sen: Mr Speaker, Sir, it is not the policy of the Singapore Government to reduce taxes in order to maintain prices I think we need our taxes and the revenues from them in order to satisfy the needs of our country. MPs, social services, economic development and other requirements.

Mr Ho See Beng (Khe Bong): Mr Speaker, Sir, a supplementary question. In view of the protection for the SIS, as a result of which the people of Singapore have to pay higher sugar prices, will the Minister not consider allowing the import of sugar?

Mr Hon Sui Sen: Mr Speaker, Sir, the answer is no. When the price went up to about $2,300 per metric tonne, I found no pressure in this House for an increase in sugar prices. I think the fact is that we have been able to maintain over the last three years a sugar price which has been entirely stable and I can see no reason why the public cannot pay this same price of 75 cents. We hope to be able to maintain this price because discussions are now going on with the Australians and if the parallel negotiations in Japan and Malaysia are favourable, I think we will also benefit to the same extent that concessions are made to these countries.

Mr Ivan Baptist: Mr Speaker, Sir, would the Minister not like to see the consumers getting a cheaper price for their sugar, and this could be done by getting, say. the NTUC Welcome to import sugar from overseas?

Mr Hon Sui Sen: Mr Speaker, Sir, I think the NTUC does not have any special expertise in importing cheaper sugar. Anyone can do it at world prices.

Mr Hwang Soo Jin (Jalan Kayu): Mr Speaker, Sir, a supplementary question. First, to what extent is the Singapore Government still interested in the Sugar Industry of Singapore? I am quite sure that the Government has still got a considerable equity interest in that company. Secondly, the Hon. Minister has gone to great lengths today to explain or to inform this House of the administrative decisions and actions taken by that company. This does seem to be in contradiction to what he has told this House a few days ago, that is, he is not accountable to this House for the administrative actions of all companies owned by Government, either wholly or partially-owned. Would he explain the apparent contradiction?

Mr Hon Sui Sen: Mr Speaker, Sir, I will explain the apparent contradiction. In this particular case the agreement with Australia and Fiji was brought to the notice of the Government and we were asked to give a letter of awareness. As representing the Government of Singapore, I think I am also involved other than as a shareholder of the Sugar Industry of Singapore. In the case of the particular question as to what interest we have, we have 40% interest in the Sugar Industry of Singapore. So we are not in control of the Sugar Industry of Singapore except to the extent that 40% gives any particular shareholder control.