. .

The sugar politics

Ever-increasing cost of production may shoot up sugar prices

Dec 18 - 24, 2000

The sugar industry in the province of Sindh, where crushing operation was severely affected for almost 15 days due to non-availability of sugarcane, has finally come out of the crisis following an agreement reached between the growers and the millers.

The deal was struck when the growers, having a strong backing from some of the big feudal lords, succeeded a good bargain to have an attractive price of Rs50 per 40 kgs of the held up stock of sugarcane estimated around 8.6 million tonnes. The growers had suspended the supply to the sugar mills at the official support price of Rs36 per 40 kg. They were determined to reduce the held up stock to the ashed if they were not paid the asking price. The growers had turned down even the price of Rs45 per 40 kgs offered by the mill owners. The grave situation was however normalized following an agreement reached between the two parties after the intervention of the government of Sindh. The provincial government had called a meeting of the representatives of growers and sugar industry to reach an amicable solution to resume sugarcane crushing season 2000-2001 at the earliest.

According to agreement, the sugar mills in lower Sindh will procure sugarcane at the gross price of Rs50/- per 40 kgs on mills delivery basis. While proportional normal lower price will be paid by the mills located in upper Sindh.

Under the agreement, the growers will immediately start harvesting of sugarcane and arrange adequate supplies, enabling the sugar mills to resume normal working from December 17, 2000.

In order to take corrective actions, the government has also assured to take appropriate action against the middlemen in the sugarcane marketing and growers will ensure direct supply of sugarcane to the sugar mills. In fact, the agreement was signed following the assurance of the federal government to provide level playing field to the national sugar industry against dumping sugar imports taking place at present. The landed cost of the imported sugar mostly from India, according to informed sources, is around Rs22 per kg. Sources in sugar industry feels that sugar industry in Pakistan may suffer due to imported sugar. They said that if import of sugar continues it might render the local sugar industry incompetitive due to ever increasing cost of production in Pakistan.

Working out the price of locally produce sugar, experts say that it may be around Rs29 per kg. The increase in sugarcane price will add 8.7 per cent to the cost of production while levy of sales tax at 16.6 per cent may bring the cost at Rs27 per kg, if Rs2.5 were included as the trade and other incidental the selling price may jump to Rs29 per kg, they felt.

It may be recalled that the government had fixed Rs36 per 40 kg as the support price for sugarcane crop. The growers however refused to supply sugarcane at the official price. Although the mills had offered to lift sugarcane at Rs45 per 40 kgs, yet the growers were insisting at Rs60 which was obviously beyond the economics of sugar production. Though the stalemate in Sindh has been broken after almost 15 days of suspended operation of the sugar mills, yet similar situation is also prevailing in the province of Punjab. Due to interrupted supply of sugarcane, the crushing operations of the mills in Punjab have also been affected which declined the production by 20-25 per cent.

Situation in the province of Punjab is likely to be normalized soon as the federal minister for commerce; Razzak Dawood had already convened a meeting between the representatives of the mills and the growers for reaching a price agreement.

Sugar mills in Punjab are however agitating over non-availability and high prices of sugarcane in most of the areas. Ch. Zaka Ashraf, Chairman Pakistan Sugar Mills Association Punjab zone has said that sugar mills in Punjab would be compelled to abandon their crushing operation if the government fails to resolve their genuine problems.

The production of 'gur' on a large scale and purchase of standing crop of cane by middlemen has aggravated the situation of crushing season this year. Since gur fetches a good price in the northern areas as well as in Central Asian States a good amount of sugarcane used in gur making.

It is unfortunate that while the agriculture sector has started showing positive results due to good economic decisions taken by the present team of the economic managers some hidden hands seem to be active to deprive the economy and the nation of its fruits. They are rightfully attaching hopes from the good results shown by the wheat, rice and cotton crops in the country. Yet their hopes are being marred by the crisis erupting out intermittently in one or the other agriculture sector. A long-term policy all cash crops including sugar industry is the need of the hour to resolve such issues in the agriculture sector. It is generally believed that sugarcane-producing areas as well sugar industry where political involvement is more than other sector needs special attention of the policy makers.