Sugar Industry which has the potential of becoming a major exporter has been reduced to crises ridden industry


Jan 06 - 12, 2003

The long awaited meeting of Pakistan Sugar Mills Association (PSMA) with Secretary, Ministry of Industries, held in Islamabad on Tuesday, agreed on the constitution of a Sugar Board to review the problems being faced by the sugar industry and suggesting urgent measures to dispose off the surplus stock of above 600,000 tonnes of sugar, the board will meet periodically to review of the pace of work in implementing the earlier decisions and help government making appropriate policies relating to the sugar industry.

The Board will include 4 representative of PSMA, one representative of cane growers, besides Minister of Commerce & Industries and Finance, Secretaries of Commerce Industries and Finance Ministries and Chairman Central Board of Revenue (CBR). The formation of board will be announced through an ordinance to be issued shortly.

The Sindh zone of PSMA did not attend the meeting as a mark of protest against the decision of Sindh government to add 50 paisas premium to the sugar cane price of Rs 43 per 40 kg fixed earlier by the federal government. According to them they were already paying Rs. 3 per kg more (against Rs 40 kg in Punjab and NWFP) to the growers on consideration of better recovery from sugarcane and as such there was no justification of any further premium.

After long deliberations with the mill-owners in Karachi Federal Minister for Industries and Production, Liaquat Jatoi, had fixed sugarcane price at Rs. 43 per 40 kg of Sindh for the current season and its formal announcement was also made. But, later overriding the federal minister's decision, the Sindh government made t mandatory for the mills to pay Rs. 0.50 per 40 kg as premium over and above the fixed price. The mill-owners had categorically refused to accept any amendment in the earlier decision and approached the President and the Prime minister against the Sindh government's decision through an SOS. They are also weighting other options including the closing down of the mills.

The Secretary Industries assured the PSMA delegation to take up the matter with the Sindh government. The meeting also decided to refer to the Board to examine and decide on the proposal of creating a fund through imposing a 22 paisas per kg as development cess on the sale of sugar. The demand of PSMA to allow Rs. 7 per kg as export subsidy to enable them to dispose off their surplus stock of sugar in the international market was also referred to the Board. This surplus stock which was the result of imprudent decision of the federal government to allow import of about 1 million tonnes of sugar during 2000 and 2001 has caused a real crisis for the mill owners.

Sugar Industry which has the potential of becoming a major exporter has been reduced to crises ridden industry because of neglect and absence of a coherent policy covering the interest of all the stakeholders the growers of sugarcane, the mill owners and the ultimate the consumers.

These were unmanageable surplus stocks of around 0.6 million tonnes, low prices in the local market, low duty on import and imposition of 3 per cent additional tax on unregistered buyer of sugar industry. The millers had informed the ministers that the huge stocks are blocking their working capital and making it difficult to enter into new crushing. They argued that the export of at least 0.6 million tonnes of sugar is not possible unless a rebate of a minimum of Rs. 7000 per tonnes is given by the government because of low prices in the international market.

According to PSMA, following is the position of sugar production, demand stock for 2002-2003 season.

Sugarcane production 2002-03

53,000,000 tonnes

Utilization by Mills 76.32%

40,447,000 tonnes

Carry in Stock 1st Oct. 2002

637,140 tonnes

Sugar Production

3,523,000 tonnes

Production form beet sugar

25,000 tonnes

Total Production

3,548,000 tonnes

Availability including carry-in stock

4,185,000 tonnes

Consumption 2002-03

3,324,000 tonnes

End year stock September 2003

861,000 tonnes

Buffer Stock Oct. 2003

280,000 tonnes

Net exportable surplus 2002-2003

581,000 tonnes

PSMA Secretary General Mr. K.A Qazalbash told this correspondent 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. 19.50 to 21.50 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 per cent while in India and Thailand the price of sugarcane ranges between Rs. 26 to 28 equivalent with sugar content of 12 to 14 per cent. Nowhere in the world the prices of sugarcane is fixed by the government except Pakistan. The prevailing prices of sugar in the internal market is $210 to 212 per tonne (about Rs. 12500) while our production cost is Rs. 19000 to 21000 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. Qazalbash added.