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The sugar Industry scenario

  1. New cotton policy in March
  2. The sugar industry scenario
  3. Mid-year economic performance
  4. Wheat import requirement
  5. Boosting the fruit exports

Is there any need to import the sugar?

From Shamim Ahmed Rizvi, Islamabad
Feb 28 - Mar 05, 2000

The last year's left over stocks and the reduced estimated production of about 3 million tonnes of sugar is more than enough to meet the domestic requirement during the year 2000. There is no need of any import as being stipulated and if fresh stocks are imported the sugar industry will face another glut as experienced in 1997-98.

There has been a drop of about 15 percent in the cultivation of sugarcane area (1015 million in 99-2000 against 1l55 million heator in 98-99). As a result the sugar production is expected to be about 3 million tonnes in 1999-2000 as against about 3.5 million last year. There is a left over stocks of sugar of about 371000 tonnes. The domestic consumption has never exceeded 3.1 million tonnes. As such the panic created about any possible shortage of sugar during the current year and consequent imports will be a repetition of the misake the government made in 1996-97 during which over 1 million tonnes of sugar was imported creating a glut in the market and the worst crises for the sugar industry. The sugar had to be exported at a price of about Rs. 13000 per tonne as against production cost of about Rs. 20,000 per tonne. The government had to subsidise these exports mainly to India causing a staggering loss to the public exchequer.

The country had a bumper sugarcane crop in 1997-98 and 1998-99 and domestic production of sugar exceeded each year 3.5 million tonnes. The year 1996-97 was a bad year and, fearing shortfall, the government in a panic allowed, imported about a million tonnes in 96-97 against an actual short fall of .3 million. In the subsequent 2 years the production exceeded domestic consumption by over a million tonnes. Surplus stocks became a problem for the government and the sugar industry leading to panic exports against heavy rebates and subsidies costing state over Rs. 5 billion. The following chart gives a clear picture of production, consumption, imports and export of surplus stocks.

Pakistan sugar production, supply & distribution 1993-94 to 1998-99

Year

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

Production

2,922.457

3,001,472

2,470,034

2,393,362

3,555,228

3,541,763

Beginning

233,890

309,309

264,659

103,553

413,290

513,062

Stocks

. . . . . .

Imports

43,669

5,288

3,214

681,083

110,990

10,97

T.Available

3,190,026

3,315,969

2,737,907

3,177,998

4,070,508

4,064,922

T. Sale up

2,613,148

2,736,784

2,366,481

1,980,072

3,042,165

3,170,374

to 30 Sept.

. . . . . .

Export

121,565

315,886

29,134

-

457,471

616,095

Consumption

2,759,142

2,735,395

2,605,220

2,764,708

3,108,975

3,077,438

End Stock

309,309

264,689

103,553

413,290

513,062

371,389

30th Sept.

. . . . . .

 

 

The crushing season during 1999-2000 started a bit late in Nov. instead of Oct. 1999. According to the latest position as on 15.2.2000 as verified by the All Pakistan Sugar Mills Association is as follows:-

Production        26,50,000 Tonnes

Previous Stock        3,71,000 "

Total:                 19,60,000 Tonnes

Lifted by traders 10,80,000

Stocks in hand         8,80,000 Tonnes

During the remaining period of current crushing season another 1500,000 tonnes can be added to the stocks. On an average 2,40,000 tonnes of stock is lifted every month by trader. Calculated on this basis the demand up to 31.12.2000 is will taken care of.

Despite having a potential for surplus production, Pakistan cannot afford to utilise it for export, because the prevailing prices of sugar in the international market are far below the cost of production in Pakistan. Sugar prices have come down in the international market from 400 US dollars to less than 200 dollars or about Rs. 10500 per tonne against production cost in Pakistan of about Rs. 20,000 including govt. tax (about Rs. 2000 per tonne). Sugarcane prices in Pakistan are the highest in the world while its yield of sugarcontent is the lowest. Export is possible only through a heavy subsidy by the government having no relevance or comparison with domestic prices.

The world is producting over 125 million tonnes of sugar annually against its demand ranging between 115 to 120 million tonnes. About 5 million tonnes is available as an absolute surplus which is sold without any relevance to the domestic prices or cost of production. In many instances the losses are shared by the state but in any case the rebates and subsidies are not as high as in Pakistan because of its high cost of production. Seemingly, therefore, presently it is not feasible for Pakistan's sugar industry to develop its export potential. At the same time it cannot afford to have competition with imported sugar. The sugar industry needs price protection for the domestic market which should be fixed by the government after carefully examining the prevailing cost of production which comes to Rs. 18000 per tonnes. With Rs. 2000 as government taxes and Rs. 3000 per tonne as selling expenses, the selling prices cannot be brought down below Rs. 23000 per tonne; while it ranged between Rs. 20,000 to 22,000 per tonne during the last 3 years just providing a survival level to the industry.

As was pointed out by the President All Pakistan Mills Sugar Association in his annual report 99, during last three years due to depressed sugar prices, sugarcane cost and, high mark ups by the Banks and DFI's sugar mills were forced with desperate sale resulting in defaults to financial institutions and the growers.

Inspite of being 10th biggest sugar producers in the world, the industry has not proven its viability and at the same time, there is dissatisfaction among sugarcane farmers. With production capacity we hold today, and the sugarcane plantation area in use, the country should have been able to produce a minimum of 4.5 million tonnes of sugar at the same cost, and should have caused a viability favourable to the industry and the farmers both. On ground truth is in reverse, because we are producing the most expensive sugarcane of the world. The yield per acre and the recovery (sugar content) of sugarcane is perhaps the lowest in the world. The average recovery in Pakistan is reduced to 8.19% in the year 1998-99. Sugarcane price is fixed by the government and forms approximately 70% of the sale price of sugar. This together with other regulated expenses, forms 87 to 90% of the sale price of sugar leaving hardly 10 to 13% revenues in the industry's control.