SUGAR CRISIS: A PREDICAMENT BEYOND COMPREHENSION
What authorities need to do is to control unregistered buyers and hoarders who are dictating the market.
BY KHALIL AHMED
Feb 20 - 26, 2006
Hike in wheat flour prices, hike in oil prices, hike in LPG and CNG prices, hike in potato prices, hike in tomato prices and the latest hike in sugar prices. It seems as though price-hike is an indispensable traditional value in our society. And who is prone to the hike phenomenon? Off course, the major chunk of 160 million population; the down-trodden and the poverty-stricken.
The predicament is beyond the comprehension of the masses and everyone wants the answers of the following questions:
who has created the on-going unprecedented increase in sugar prices? Who should be held accountable? And what could be the factors behind this unfolded misery? Well, there could be various factors such as (i) high profile dispute between the sugarcane growers and the sugarcane mill owners which is made public almost every year through print and electronic media. (ii) hoarding which is beyond the control of the authorities. (iii) inefficient and sluggish response by the authorities which speaks volumes of the widespread apathy (iv) unregistered buyers, an issue which leads to black-marketing and goes unheeded unfortunately (v) cartel within the cabinet which cares for nothing but the vested interests over the national interests. (vi) high oil prices as cane is being turned into ethanol in many countries (vii) high sugar prices in the international market, and (viii) the recent import of raw sugar which can be termed as white elephant.
First, let's analyze the prolonged dispute between the growers and the mill owners which seemingly is the root of the rampant unrest. The current month is the worst month in terms of the soaring sugar prices since unending queues of the underprivileged are rife at all 450 Utility Stores for the population of over 160 million across the country. 'Survival of the fittest' is commonplace at the Utility Stores where sugar is being sold for 27 rupees per kilogram against the retail open market prices of up to 42 rupees per kilogram.
Official sources revealed that the reasons for the hike were twofold: approximately 20% reduction in sugarcane & sugar production in the country and price escalation in the international market. What are the reasons for the decline of sugar production across the country? Obvious and blatant answer is the dispute between the growers and mill owners. Restricting the boundaries of the dispute to Sindh, I would like to take you to the recent past, not to the distant past. Let's look at the last four to five years. A few instant instances are: i- It was in October 2000 when sugarcane growers of Badin protested against the non-payment of about 9.5 billion rupees by nine sugar mills. ii-It was in December 2002 when the Growers Associations of Nawabshah demanded 43 rupees per 40 kg from the sugar mill owners. It is to be remembered that growers were offered 36 rupees per 40 kg despite the intervention of the government. iii-It was again in December 2002 when cane growers from Mirpurkhas demanded the rates to be augmented to 60 rupees per 40 kg. iv-It was in March 2004 when cane growers from Mirpurkhas protested against non-payment of 250 million rupees by the sugar mills. v-It was in November last year when the Sindh Abadgar Board protested in Tando Mohammad Khan against the non-payment of 160 million rupees vi-In January, government fixed the minimum price of sugarcane at 60 rupees per 40 kg but brought is down to 58 rupees per 40 kg, to the utter dismay of the growers vii-zoning system announced by some sugar mill owners in Sindh last December restricting the growers to sell crops to only their respective area mills for which growers of Thatta expressed their displeasure.
The question is what role has been played by the concerned authorities regarding the above issues? It is obvious that if payments are not made in time and the crop is not purchased at the right price, the growers would display apathy towards the production of such crop which would eventually lead to the decline hence the industry and the end-users will suffer a great deal. Pakistan is an agricultural country and to my utter surprise, no concrete measures have been taken and the future strategies don't seem to have been chalked out to produce just 3.8 million tonnes of sugar which is the total annual consumption. Instead of focusing on import from India, China and other countries which will lead to obvious shutdown of sugar mills and loss of hundreds of jobs, the authorities need to anticipate the problems long before and should focus on strengthening the home industry through investment and resolution of dispute between the two major stake holders: growers and mill owners. Import from India will never solve our problems. In such a condition, the prices will escalate unabated and the government's import bill will touch another mark.
World sugar production during 2005-06 is estimated at 147.8 tonnes with an increased production and our country has witnessed decline in production. During the current year, we need at least 800,000 tonnes of imported sugar for which the major beneficiary will be India which exports sugar not only to Pakistan but also to Bangladesh, Myanmar and Indonesia. Indian sugar will not help lower prices since prices in the international market have soared as well. World sugar prices soared by over 60% last year apparently due to high oil prices and this trend is persistent at the moment as well. It is to be noticed that India also imports raw sugar from foreign countries including Brazil. The largest producer and exporter of sugar in the world, Brazil, accounts for 20% of world sugar production and over 38% of world exports. Since high oil prices are one the major concerns in the world, Brazil is replacing gasoline with ethanol. Brazil has world's largest ethanol industry which expects to produce about 4.4 billion gallons this year. Surplus sugar is turned into ethanol instead of sugar, there are obvious reasons for sugar price escalation at present and in future too. Last week's import of over 19,000 tonnes of sugar from India is not the solution to the problem in terms of price unless the government provides subsidy which has been declined by Dr Salman Shah, Advisor to the PM on Finance. It must not be forgotten that during 1997-98, over 02 million tonnes of surplus sugar was exported from Pakistan and the then government had given subsidy on export. At present, when the masses are being fleeced, the concerned authorities should think of giving subsidy in order to provide relief to the consumers from the plight. One of the opposition MNAs has blamed government officials for importing 200,000 tonnes of raw sugar recently for which Pakistan Sugar Mills Association (PSMA) has also expressed dismay terming it game of favoritism where the contracts were given to only those who were liked by the authorities. This may be one of the reasons for the sugar price hikes as well.
I think, the deteriorated situation can be prevented from getting further aggravated in case some prompt measures are taken.
What authorities need to do is to control unregistered buyers and hoarders who are dictating the market. PSMA should not oppose the registration of buyers and the dues of the growers should be paid in time according to the government rates. Sugarcane growers of Badin, Mirpurkhas, Hyderabad, Nawabshah, Thatta and other cities of Sindh should be given proper incentives so that production may increase and we may save our foreign exchange and produce in surplus for export to the countries like Indonesia and Bangladesh.
Government officials don't see prices plummet shortly and neither does PSMA. There are no chances of prices flagging below 38 rupees per kg in the open market since 40kg sugarcane is being sold between 100 and 110 rupees at present across the country. The idea of importing sugar is detrimental to the home sugar industry and would add to the misery of the consumers. In the end, I would recommend that increasing the number of Utility Stores to 1,000 is not the solution to the problem. What we need is not to repeat our mistakes, have prudent policies, anticipate our problems upfront and take corrective timely measures, and endeavour to strengthen our home industry for lasting prosperity.