An over supply despite drought-like situation

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 India.

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 capacity.

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.