Restoring the economic viability of sugar industry

Textile exports to China Restoring the economic viability of sugar industry $ 10.1 bn exports target Keys macro economic growth

Need to increase availability and to improve sugarcane procurement system

By SHABBIR H. KAZMI
July 23 - 29 , 2001

Despite the fact that the sugar industry in Pakistan has an installed capacity to produce about 5.5 million tonnes refined sugar per annum, the average capacity utilization in the crushing season has been as low as half. Sector analysts attribute low capacity utilization to limited availability of sugarcane. The situation has been further aggravated with the emergence of middlemen resulting in a staggering amount of Rs 9 billion spent on transportation of sugarcane during last crushing season — neither the mills nor the growers have benefited from this expense. Rather, the breach between growers and mills has further widen.

Pakistan Society of Sugar Technologists (PSST) organized a seminar during this past week to discuss the issue. Muhammedmian Soomro, Governor of Sindh delivereing the key note address, emphasized the need for increasing sugarcane production and improving sugar recovery to restore the economic viability of sugar industry which has a direct bearing on rural areas of Pakistan. He asked all the stakeholders to join hands in resolving problems confronting them individually and collectively. The Governor said, "Growers should adopt modern techniques for cultivation of sugarcane to ensure supply of superior quality sugarcane to the mills." He also suggested to the mills to try to cut costs of production to become competitive in the global markets.

Earlier, in his welcome address, Shifaat Zaidi, President of the society pointed out that due to emergence of middlemen some major problems have cropped up. He specifically referred to the cost incurred on transportation of sugarcane during 2000-2001 crushing season. He said, "There was huge loss of hard earned foreign exchange that was burnt on purchase of fuel for the unnecessary transportation of sugarcane from far flung areas. It is estimated that about Rs 9 billion have been spent as transportation charges over and above the desired and scheduled carriage rates in the country during last season."

"If we are able to increase our per hectare yield of sugarcane, increase sucrose contents in sugarcane, at par with the neighbouring country and overcome the problems already stated, our industry in its present form is capable of producing five million tonnes sugar per annum", was the wayout suggested by the President of PSST. It is therefore, imperative that all the factors affecting performance of sugar industry must be examined thoroughly.

At the end of seminar a number of recommendations were suggested for the consideration by Pakistan Sugar Mills Association. During the deliberation it was also pointed out that the mills have been asked to undertake most of the measures, there has been no strategy recommendations for the farmers. Farmers demand support from mills but are willing to commit guaranteed supply of sugarcane to the mills. Though, not expressed very clearly, it was noted that the concept of middlemen has been followed because mills have not been making timely payments to growers.

However, there was also a consensus of delegates that the issue of delayed payment or no payment at all, mostly pertains to the Punjab. According to an analysts, "Till the sugar mills were owned and operated by the business community, there used to be hardly any problem of delayed payment. However, with the entry of politicians in the sugar industry, delayed payment has become a major threat for sugarcane growers. As a larger capacity is controlled by politicians in the Punjab, the issue has become more intense. Interference by mills owned by politicians in Sindh, is also on a constant increase." It is on record that in last couple of years these politicians tried to close some of the sugar mills in the province simply to buy sugarcane from growers at their own terms.

According to an industry analyst, "Most of the problems facing the sugar industry is the outcome of entry of politicians in the sugar business. On the one hand they control sugarcane supply and on the other hand they also own mills." Having this dual advantage, they always succeed in convincing the government to increase sugarcane support price. They are least bothered about the price because even if they delay payments by months and years the small farmers of their inherited constituencies are not permitted to sell their produce to any other mill.

The concept of zones has worked satisfactorily in the past and farmers were the largest beneficiary. Though, the industry has again consented for the introduction of the zone system, the politicians are the biggest hurdle. At the same time these feudal lords are against improving sugarcane yield. They strongly believe that any increase in production will reduce their control on sugarcane price and supply.

If the present managers are serious in the development of rural economy of the country, they should try to break such cartels of sugarcane growers and suppliers. The industry has a large potential to earn foreign exchange and it not be wasted.