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The sugar crisis

  1. The NFC award
  2. The Sugar crisis
  3. Agri-tax: A challenging task
  4. Water crisis in Karachi
  5. Irrigation scenario in Pakistan

Despite having a strong production base, Pakistan has to import sugar

Jun 12 - 18, 2000

Pakistan may have to import at least 400,000 tonnes of sugar this year due to shortfall in production during last crushing season. This shortfall, however, was not unexpected, as the professionals, engaged in this business, had already predicted about the setback.

To describe the shortfall as setback seems to be an appropriate word specially when a country, having a strong agriculture and industrial base for sugar production, reverts to the position of an importer after remaining in the exports for quite sometimes. The sugar industry exported 500,000 tonnes each year. The total production of sugar during last season was estimated at 2.400 million tonnes against the requirement of 28-29 lakh tonnes.

It is unfortunate that the economic planners did not pay heed to the forecast by the sugar experts about the shortfall they had declared some 6-month back. The sugar price at that time was $180-$190 a tonne in the international market which has now shot up to the current price level of $260 a tonne. Everybody knows that one-year forward trading is in vogue all over the world. Had we entered the forward trading 6-month earlier for import of 300,000 tonnes we would pay only $57 million instead of $78m as a result of rise in the international prices.

This means that if Pakistan goes for import of 300,000 tonnes of sugar to meet its requirement and it has to go, the economy has to bear the burden of an additional cost of $21 million or Rs1.13 billion due to price escalation.

At present, the sugar industry has an inventory stock of around 619,000 tonnes of sugar which is hardly enough for 3 months i.e. June-August, as we consume around 220,000 tonnes per month. September-October is the lean period for which we have to import sugar.

The crushing season starts from mid-October in Sindh and from middle of November in Punjab every year. This means that the country would have to depend on imported sugar at least for three months consumption.

Replying to a question regarding start of the crushing activity at least one month earlier with a view to save the precious foreign exchange, the experts observed that going before schedule would amount to a huge loss of recovery of sugar out of the cane crop. Immature crop contains a very little of sugar in canes. For example, the current age of the crop would produce hardly one per cent of the sugar. The recovery level would increase to 7-8 per cent in October and November. The crop could yield even up to 11 per cent if the crushing would start in January. Hence early crushing in no way is commercially feasible. Even the Oct-November crushing cannot be described as an ideal situation as the crop usually gets fully matured in December-January.

Spelling out the factors leading to current shortfall in sugar production, the experts said that beside other factors, introduction of an Indian variety of sugarcane commonly known as "DISCO" was one of the major factor for production. This variety of cane comparatively carries much less amount of sugar contents as compared to local varieties. However it is heavier in terms of weight which attracts the interest of the grower. A ban was put on that variety sometimes back but was lifted later for unknown reasons. Other factors for less production include reduction in the area under cultivation for cane crop, unfavourable weather conditions, less rains and of course the cyclone factor which had hit the cane growing belt in Badin and Thatta areas last year. At least 30 per cent crop was damaged by that sea storm.

All said and done the fact remains that the consumers already under severe price hike pressure are forced to buy sugar at Rs23-24 per kg mainly due to mismanagement on the part of the people at the helm of affairs. There is a general practice of maintaining a buffer stock of sugar by every sugar producing country. In India, the government releases sugar out of the buffer stocks to maintain the price level in the market whenever it is needed.

Despite having a strong production base of sugar industry with 75 units and installed production capacity of 4.867 million tonnes, the industry has always been suffered of 50 per cent capacity utilization less than the installed capacity. The sugar industry despite having all potentials to support country's export base never gained the status of a cash crop. The current situation is rather hopeless as the country instead of having any gains out of the strong industrial base, is compelled to import sugar at a much higher price to meet its requirement. This is only because of lack of coordination between the economic planners and the industry. Situation demands that a comprehensive sugar policy be evolved supporting the industry to produce sugar both for the domestic needs as well as for exports.