RETAIL PRICE OF SUGAR

Mr Ang Nam Piau asked the Minister for Trade and Industry why the retail price of sugar to Singapore consumers is so high in relation to the world price, and if the Government will consider subsidising the difference between the current Singapore price and the world price so as to reduce the price in Singapore.

The Minister for Finance and Acting Minister for Trade and Industry (Mr Hon Sui Sen): Mr Speaker, Sir, it is not appropriate to judge the domestic price of sugar at any one point of time or only when the world prices are lower. Sugar prices often fluctuate rapidly on the world market. To ensure security of supplies of raw sugar and to help maintain the stable domestic selling price for refined sugar, the Sugar Industry of Singapore has had to enter into long term supply contracts. The long term contracts with Australia and Fiji, concluded towards the end of 1974, assured us of raw sugar supplies for 1975 to 1977, and thereafter up to 85% of our domestic requirements until 1980. The contracted price at $689 per metric ton was then extremely favourable compared to the prevailing market price of about $2,580 per metric ton.

Thus, the Sugar Industry of Singapore was able to maintain the domestic retail price of refined sugar at $1.24 per kg from 1974 to April 1978 and at $1.20 per kg since then. Otherwise, Singapore consumers would have had to pay as much as $3.72 for their kilogram of sugar if they 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 7 cts per kg lower than the average world price of white sugar.

We should therefore look at the price of sugar on a longer term basis and not be misled by the difference between the current Singapore price and the world price. There is no ground for Government to consider subsidising sugar prices when the average price paid by Singapore consumers is lower than the average world price. Moreover, to subsidise to lower the price of sugar is to invite disaster. We do not grow sugar. Many a developing country that has sought popularity by subsidising rice, sugar and other essential foodstuffs have distorted their economy and suffered endless economic woes. We must learn from other people's unhappy experiences.

Mr Ho See Beng (Khe Bong): Sir, I would like to ask the Minister for Finance why tariff protection is still accorded to sugar and not to flour.

Mr Hon Sui Sen: Sir, in the case of sugar, the price has been based on a long term contract which has been entered into by a company in which the Government has full control and can be certain of the cost of manufacturing. In the case of the Sugar Industry of Singapore, I think we have roughly 40% of the equity, and we are therefore in some control. We know exactly what is happening in the company.

In the case of flour, the consumption of flour from the mill is only a part of the total capacity of the mill which is also designed for export. Moreover, there are different varieties and it would be very difficult to control the price of flour. Also, the price of wheat flour fluctuates to such an extent that the mill should be asked to compete on a world basis. It would be to the interest of the Singapore consumer that wheat flour should not be controlled.

Mr Ho See Beng: Sir, from the consumers' point of view, if we allow the import of sugar, does the Minister not think that we can also bring down the cost of sugar, so that this will benefit the consumers?

Mr Hon Sui Sen: Of course, the price of sugar can be cheaper when the world price is lower. It can also be very much dearer, and I mentioned that it could be $3.72 per kilogram, which was the price at its peak in 1973 or 1974.

Mr Hwang Soo Jin (Jalan Kayu): Mr Speaker, Sir, would the Minister inform the House as to whether there is a limitation on the margin of profit that the Sugar Industry of Singapore is allowed to make, in view of the fact that the sugar industry is a protected industry?

Mr Hon Sui Sen: Sir, the profit which is allowed to the Sugar Industry of Singapore is determined by the Government, I think it has been around 8% on the equity, only on domestic operations. If they can make money, for example, on export, I allow them the full profit because this is not a matter which should be controlled by the Government.

In the same way, if they can, in buying the sugar or paying for it, make a profit on exchange, I think that is also a legitimate profit which should be allowed to the Sugar Industry of Singapore. On the other hand, of course, if they make a loss that would be entirely, again, charged to them.