Sugar crisis: Who is to be blamed?

Sugar crisis: Who is to be blamed? PHA Housing Programme Exporting for prosperity

Unplanned actions both at the time of exporting the surplus sugar or its import to meet the likely shortfall have also contributed to the present crisis.

From Shamim Ahmed Rizvi, Islamabad
Feb 05 - 11, 2001

After cement now the Sugar Industry is facing a crisis. Is it not an irony of fate that the country which had an exportable surplus of about 500,000 tonnes in 1998-99 has imported almost the same quantity in the form of raw and refined sugar during the year 2000. Wrong policies and untimely decision, manipulated by vested interests to import sugar have been mainly responsible for the present scenario. Unplanned actions taken in a panic—both at the time of exporting the surplus sugar or its import to meet the likely shortfall have also contributed to the present crisis.

Particularly in the current season (2000-2001) in action and unpardonable lethargic attitude of the provincial authorities to intervene and resolve the prolonged tussle between the sugarcane growers and the Sugar Industry is to be blamed for the present situation.

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. Earlier the year 1996-97 was a bad year and, fearing shortfall, the government, in a panic, allowed import of about a million tonnes in 1996-97 against an actual shortfall 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.

As a result of the panic sale and low prices during 99-2000 there had been a drop of about 15 per cent in the cultivation of sugarcane area (1015) million in 99-2000 against 1155 million hector in 98-99. As a result the sugar production was expected to be about 3 million tonnes in 1999-2000 as against about 3.5 million the year before. There was a left over stocks of sugar of about 371000 tonnes. The domestic consumption had never exceeded 3.1 million tonnes. As such the panic created about any possible shortage of sugar during the year and consequent imports was a repetition of the mistake 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 crisis for the sugar industry. The sugar had to be exported at a price of about Rs. 13000 per tonnes 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 actual domestic production during 99-2000 touched 2.9 million tonnes with a shortfall of about 2 lac tonnes. Despite appeal and protest of All Pakistan Sugar Mills Association (PSMA) not to import more than 3 lac tonnes, the authorities allowed import of raw and refined sugar of about 6 lac tonnes.

This year again the PSMA has asked the Commerce Ministry to immediately ban the import of sugar because the estimated domestic production of 2.6 million tonnes coupled with over 6 lac tonnes surplus of already imported stock will adequately meet the domestic demand for the current year.

According to the PSMA, the domestic needs of the sugar were estimated at 3.12 million while the domestic sugar production would be around 2.6 million tonnes. To meet this gap, 300,000 tonnes of imported raw sugar is currently present in the country while the stocks of about 386,000 tonnes of imported refined sugar would also be available during the current fiscal year. Thus there would be around 3.286 million tonnes of sugar available in the country this year against an estimated demand of 3.120.

It is, however, gratifying to note that the reversals in sugar production in the last and current seasons has ultimately driven home to the government the urgency of meaningful measures to identify the distortions in this sector and remove them in order to revitalise the highly important agri-based sugar industry. The Commerce Minister who had a series of meetings with representatives of sugar industry, sugarcane growers, Ministry of Food & Agriculture, Commerce & Finance, told newsmen last week that federal government is soon bringing out a new long term sugar policy to make the sector market oriented and efficient.

A balanced and sustainable sugar policy which looks after the interests of both the sugarcane farmers and the sugar mills owners, and which is reached upon mutually and is acceptable to both is the need of the hour. For this, the price of sugarcane should be determined in proportion to the quantity of sugar obtained from it.

Concrete measures should also be taken to boost the per acre sugarcane production and proper research should be undertaken to look into the underlying factors behind the falling production of the crop. Special zones adjacent to the mills should be established for the supply of sugarcane to the mills. Sugar mills and the concerned government institutions should make investment to replace old and non-productive sugarcane varieties.