The mills located in Sindh express inability to commence crushing season

Oct 13 - 19, 2003

The sugar mills located in Sindh province have expressed their inability to commence 2003-04 sugarcane crushing season due to the prevailing government attitude and its failure to resolve the issues leading to loss of billions of rupees to the mills. The provincial government is pressurizing the mills to commence crushing but does not seem to be ready to help them in the disposal of the inventory they are carrying. The provincial government is also pressurizing the mills to make full payment, for the sugarcane supplied during the last season, to the growers prior to the commencement of next crushing seasons.

According to industry situation the mills have been forced to make this unpleasant decision due to apathy of provincial government. While the Punjab government tries to maintain balance in its policies towards industry and agriculture, Sindh government seems to be failing in looking after the interest of both the sectors. Its tilt, particularly towards sugarcane growers, has created uneven playing field. While sugar mills located in Punjab are prospering, financial losses of mills located in Sindh continue mounting. Even the Ministry of Production has not been able to fulfil the promises made with the millers.

The tilt of provincial authorities towards sugarcane growers is event from 1) fixing of sugarcane price higher than the price recommended by the federal government and 2) insistence on payment of 'quality premium' by the mills to sugarcane growers. The Punjab government has been fixing sugarcane support price lower than the price recommended by the federal government and mills are not required to pay quality premium. Therefore, it will be correct to say Sindh government instead of helping this vital agro-based industry has put it at a disadvantageous position.

It is necessary to reiterate that sugar industry in Sindh is the engine of economic prosperity and growth. Historically, Sindh has been producing surplus sugar and meeting the demand of rest of the country. It was only recently that first Punjab attained self-sufficiency and then started producing surplus sugar. The decision to import sugar, at a wrong time, also added to the miseries of mills located in Sindh. These can neither sell their surplus production in local market nor export it. The slower off take of sugar also results in delay in payment to growers.

According to industry sources, sugar mills have already made the payment at Rs 4 per 40kgs as agreed with Minister for Production and Industries. The payment of another Rs 3 per 40kgs was subject to government meeting some of the demands of millers. Since the government has not withstood its commitment, the mills are also not obliged to make any further payment to growers. Sugar industry representatives say, "We are not demanding concessions or incentives from the government. We want the GoP to come up with a clear cut Sugar Export Policy, remove the disparity between Punjab and Sindh and instruct the provincial authorities to stop using 'defunct' Sindh Sugarcane Act to twist the arms of millers.

This Act was promulgated to ensure smooth working of sugar mills. According to this Act the mills were required to notify to the government 1) commencement/termination of sugarcane crushing season and 2) run the mills for specified number of day or till the entire crop has been utilized. Two of its important features, the government buying the entire production of sugar mills and the zoning system are no longer applicable. The government withdrew the 'sugar rationing system' in 1985 and abolished the zoning system in 1988. Therefore, the Act has lost its relevance completely and any attempt to pressurize mills under the cover of said act tantamount to unethical practices of government functionaries.

During the last two decades the mills have expanded their installed sugarcane crushing capacities and also tested the phenomenon of curtailing season. In the past at average the mills in Sindh were running over 180 days, from October to June. However, the mills can crush almost double the quantity of sugarcane in around 120 days now. Therefore, the mills prefer to commence crushing in third or fourth week of November, depending on the maturity of sugarcane crop, and close the season as early as possible. Both the millers and growers have benefit from the curtailed season.

However, the concern authorities, using (misusing) the Sugarcane Act, are once again pressurizing the mills to commence crushing season in October. The point of view of provincial authorities is that the county has bumper sugarcane crop and with early commencement of crushing, the country can achieve production of around four million tonnes of sugar. However, they fail to recognize the fact that the current inventory and expected production would create a surplus of over one million tonnes of sugar.

Therefore, unless the government fixes reasonable support price of sugarcane and also announces clear-cut sugar export policy how the mills can commence crushing. The ongoing tussle between the millers and the government will only hurt the rural economy, particularly in Sindh. Not only that financial condition of sugar mills will deteriorate but also performance of financial sector will be affected badly due to possible default on payments and higher provisions against non-performing loans.