Gone are the days when sugar industry was in the
control of business community. Now those who are either politicians or
have political connections control bulk of the installed capacity. The
main raw material supply, sugarcane, is also in the hands of those who
have political connections. However, over the last couple of years there
has been some conflict of interest. Mainly because sugarcane growers and
millers have become opponent.
In Pakistan, the agriculturist lobby has always
enjoyed the biggest say or has been influencing the industrial policy.
Knowing the structural weakness of Pakistan's manufacturing sector and
their strong clout, farmers have often succeeded in persistent increase
in support price for various food and cash crops. It is evident that
Pakistan's large-scale manufacturing sector is dependent on two crops,
cotton and sugarcane.
Most of the cotton growers have strong political
links. At times, some are with the ruling government and others may be
sitting on opposition benches. Since the interests are common they
always support each other. Though, some of the politicians have entered
into spinning, they have not attained a dominant role as yet. Looking at
the manufacturing sector of Punjab, it is evident that politicians have
stake in diversified industries.
As opposed to this, the rural economy in Sindh is
almost entirely dependent on sugar mills. Farmers draw the largest
percentage of their income from sugarcane growing and mills also provide
significant employment, though mostly seasonal.
Most of the textile units are located in couple of
large cities only. The elite of the province now wear two caps,
custodian of the interest of farmers and representative of rural
industries. However, at times the interests become so intermingled that
if they protect their interest in agriculture there is a fear of losing
government support. If they try to protect their interest in rural
industries their opponents become supporters of farmers. Since the
stakes are high they are often caught in a situation 'When I said that I
meant this and when I say this I meant that'. Therefore, the problems
often linger on and cannot be resolved.
The best example of prevailing situation is the on
going crisis of sugar industry in Sindh. Millers have refused to
commence the next sugarcane crushing season due to the piled up
inventory. At the same time farmers, that include some of the sponsors
of sugar mills operating in Sindh, are putting pressure on the
provincial government to force the mills to start crushing. While some
of the mills are not willing to pay higher price of sugarcane, the
millers enjoying political clout, who are also the largest producers of
sugarcane, are not willing to let the government fix lower support price
The largest vote bank of interior Sindh also comprise
of sugarcane growers. Therefore, the custodians of farmers' interest are
not allowing the government to bid farewell to fixation of sugarcane
support price as well as quality premium. Therefore, they are demanding
commencement of season at the earliest, fixing the sugarcane support
price and continuation of payment of quality premium.
However, due to their hypocrisy they are gradually
losing the ground and millers are attaining the power. The millers have
told the government categorically to bid farewell to fixing support
price and payment of quality premium. They are demanding these on two
grounds, at present the government does not fix support price of cotton
and the payment of quality premium has been stopped in Punjab after the
judgement of Punjab High Court.
The millers also say that in case the government
allow increase in support price of sugarcane it should also allow the
millers to increase ex-factory price of sugar. They have a valid point
because if there is an increase in cost of raw material there should
also be a corresponding increase in cost of finished product. However,
the government does not seem to ready to accept this point. The key
reason for this refusal is that price of locally produced sugar is
already high as compared to imported sugar.
The key reason for higher cost of locally produced
sugar are two, high cost of raw material and low capacity utilization.
Sugarcane growers are not ready to increase availability of sugarcane
fearing a decline in its price. The inadequate supply of sugarcane
results in poor capacity utilization, as low as 50%. Therefore, a more
plausible option, to bring down the cost of production, is to achieve
higher economies of scale.
However, economies of scale cannot be achieved
without allowing free export of sugar. However, the GoP does not seem to
be ready to make this crucial decision. For the last three years sugar
production has been much above the local consumption. The absence of
sugar export policy has resulted in huge inventory of sugar at the mills
and delay in payment to farmers. The situation has attained a level
where the millers in Sindh are not willing to commence the next crushing
season. If the government is serious in resolving problems of millers
and growers it must announce a clear cut sugar export policy