Sugar industry of Pakistan which has the potential of
becoming a major exporter has been reduced to a crises ridden industry
because of continued neglect and the absence of a coherent policy
covering the interests of all stakeholders — the growers of sugarcane,
the mill owners and the ultimate consumers.
The concerned authorities have been taking adhoc
measures to overcome the crises occasionally erupted in the industry
during the past few years mainly to arrange payment to the growers
withheld by the mill owners because of their financial difficulties.
Since many years, the sugar industry is faced with serious problems of
unsold stocks and high cost of production making export unfeasible
without some support from the government in the form of export subsidy.
Almost every year growers agitate for non-payment or delay in payment by
mill owners for the sugarcane supplied. When the agitated growers come
on the street, the government intervenes with some adhoc solution and
overcome the crises temporarily. Last year when the growers blocked the
roads after a long delay in their payment the government found a quick
solution of directing Trading Corporation of Pakistan (TCP) to buy two
lacs tonnes of sugar from the mills against cash (out of about 8 lacs
tonnes of unsold stocks) and thereby help the mill owners financially to
clear the dues of the agitating farmers. The mill owners were demanding
either to give a subsidy on export of sugar or reduce the purchase price
of sugarcane which has been fixed by the government and which according
to the mill owners is the highest in the world. Sugar purchased by TCP
last year is still lying the godowns of the concerned mills.
This year the industry is faced with the same crises
in a much more serious form. Seventy one sugar mills in the country have
over a million tonnes of unsold stock in their godowns. Financially
weaker establishment have withheld payment of the grower. Some of them
have started selling at low prices undercutting others resulting to a
price crash brining down selling prices of sugar from Rs. 25/26 per kg.
to Rs. 17/18. This scenario is threatening the future of sugar industry
in the country.
As usual government has again intervened this year.
The only redeeming feature is that this time, Prime Minister Mir
Zafarullah Khan Jamali has personally intervened and under his
instruction a committee has been formed having equal representation of
the growers' mill owners and the government official to recommend both
short-term and long-term measures to save the industry's future. The
most demanding problems of sugar mills is the surplus stock of about one
million tonnes. Pakistan Sugar Mills Association has demanded from the
government for a subsidy of about Rs. 7 per kg on export of sugar and
suggested that a fund may be created for this purpose through imposing a
cess of Rs. 25 paisa per kg on domestic sale of sugar. The 71 mills are
producing over 3.8 million annually against the domestic demand of about
3.3 million leaving a surplus of about half a million tonnes every year.
PSMA Secretary General Mr. K.A .Qazalbash told this
corresponded that the cost of production of sugar in Pakistan is highest
in the region because of high prices of sugarcane despite low recovery.
The production cost ranges between Rs. 19.00 to 20.00 per kg depending
upon the sugar content in the cane. "We are paying Rs. 43 per 40 kg
for sugarcane in Sindh with sugar contents from 8 to 10 percent while in
India and Thailand the price of sugarcane ranges between Rs. 26 to 28
equivalent with sugar content of 12 to 14 percent. Nowhere in the world
the prices of sugarcane is fixed by the government except Pakistan. The
prevailing prices of sugar in the international market is $210 to 212
per tonne (about Rs. 12,000) while our production cost is Rs. 19,000 to
20,000 per tonne (that includes 18% sales tax). How this surplus stocks
can be exported without subsidy. If it is not exported, the mills will
have to cut down their production causing panic among the growers, Mr.
Les us hope that this time the government will not
feel content with adhoc measures only. A permanent and workable solution
should be found to avoid reoccurrence of such periodic crisis. Sugarcane
grower interest should be protected by fixing a minimum price of
sugarcane but at the same the genuine problems of the mill owners and
the future of industry must also be protected.