Ever-increasing cost of production may shoot up
By AMANULLAH BASHAR
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
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
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.