An over supply despite
By SHABBIR H.
May 20 -June 02, 2002
Despite a drought-like situation prevailing in the
country, sugar industry was able to produce over 3.2 million tonnes
sugar during the recently concluded crushing season. Last year about
2.5 million tonnes sugar was produced. It was possible mainly due to
two factors, greater availability of sugarcane in Punjab and an
overall improvement in the recovery percentage. This would not only
save the country from spending dollars on the import of sugar but also
offers an opportunity to export over 350,000 tonnes of sugar and earn
extra foreign exchange.
According to sector analysts sugar mills suffer
either the sugar is produced in excess of local demand or there is a
shortage of sugarcane. In case of oversupply, the mills have to carry
huge inventory and payments to growers are delayed. If there is
shortfall in sugarcane production, the average cost of production goes
up and mills have to sell sugar below cost. They say that it is a
cyclic phenomenon. Once there is a bumper crop, the following season
always witness reduction in sugarcane supply. Therefore, to avoid any
shortfall of sugarcane supply, policy makers must come up with a
comprehensive sugar policy, in consultation with all the stakeholders.
During the 2001-2002 season sugarcane crushed in
Punjab and NWFP was significantly higher but there was a decline in
Sindh. The mills in Punjab crushed over 25 million tonnes of sugarcane
as compared to about 18 million tonnes during the previous year. In
NWFP crushing increased from 0.84 million tonnes to about 1.29 million
tonnes. Whereas in Sindh total crushing came down from 10.5 million
tonnes to 10.2 million tonnes.
Sugar production in Punjab was 2.157 million tonnes.
Whereas as Sindh and NWFP produced 0.948 million tonnes and 0.105
million tonnes respectively. In Punjab average sugar recovery improved
from 7.96 per cent to 8.52 per cent. Sindh registered an increase from
9.22 per cent to 9.27 per cent and in NWFP average went up from 7.18
per cent to 8.09 per cent.
Better availability and higher recovery percentage
also brought down use of raw sugar. There was a drastic reduction in
the quantum of sugar production from raw sugar. During last season
367,386 tonnes sugar was produced from raw sugar but during the season
under review only 15,063 tonnes sugar was refined from raw sugar. This
proves that if the sugarcane availability improves the need for import
of raw sugar also goes down or raw sugar import can complement in
achieving higher production if the sugarcane supply is not sufficient.
Keeping in view the installed sugarcane crushing
capacity of mills, ranging from 5.5 million tonnes to over 6 million
tonnes per annum, one can only reiterate the need for improving
sugarcane availability in the country. However, the mills cannot
produce higher quantity unless there is a clear cut policy regarding
sugar export. After producing surplus sugar in the past, the mills
have always faced difficulties in exporting the commodity.
It is a common complaint that sugar price in
Pakistan is higher as compared to the prices in neighbouring
countries. Industry experts say, "If the average capacity
utilization is around 50 per cent and bulk of the cost of production
comprise of sugarcane cost, how can one expect the local mills to be
competitive.?" The government keeps on increasing sugarcane price
on the pretext that cost of inputs are going up. The real issue is
that the average cost per tonne of sugarcane is higher in Pakistan
because yield per acre is low, almost half the yield achieved in
It is often said that lower yield is due to
inadequate supply of water. It is partly correct only. The real
problem is that farmers in Pakistan are still cultivating low yielding
and low sugar content varieties. The delay between cutting and
crushing of sugarcane also reduces sugar recovery. The problem in
Sindh seems to be of greater magnitude. Despite enjoying more
conducive conditions, as compared to the prevailing conditions in
Punjab, the mills are not able to fully exploit the installed
Industry experts say that Sindh has always been
producing surplus sugar. However, after Punjab also achieved
self-sufficiency, the millers in Sindh are reluctant to produce
surplus sugar. Unfortunately the two potential export markets,
Afghanistan and India, cannot be catered efficiently from Sindh. With
the suspension of trade with India, even the mills located in Punjab
are facing problems in export of sugar.
According to an industry expert, all of us know the
problems faced by the sugar industry as well as the solutions.
However, the policy makers only wish to maintain status quo. When will
they wake up and respond to the situation, remains a big question.