25PC CUT IN SUGAR PRODUCTION FEARED
2004-05 can be eventfull for sugar industry
By AMANULLAH BASHAR
Sep 27 - Oct 03, 2004
The coming events have started casting their shadows on the sugar industry. So far the industry facing the problem of surplus and appealing the government to lift the excessive inventory to enable the millers to keep moving the wheel especially in Sindh.
The remaining part of the current financial, however, seems to have both negative and positive developments in store for the sugar industry in Pakistan on account of changing scenario at home and abroad.
On the domestic front, the industry may confront a shortfall in cane supplies estimated to the tune of 25 percent owing to reduction of under cultivation land for the sugarcane crop this year. The area under cultivation was reduced in view of acute shortage of water in the province of Sindh. The overall assessment of the crop last year was around 50.3 million tons, which is certainly to go down in the current season.
The start of the crushing season in Sindh is another issue confronted to the industry in the province of Sindh, as the provincial government has given a deadline of October 1, 2004 to start crushing of the season. However, the millers are reluctant to comply with the government advice to start crushing the given deadline as they feel that the crop was not fully matured to yield a better recovery. They have expressed their concerns that going for early crushing means to face yet another loss of low yield due to premature crop.
In a way, a tension like situation continues to mount in the industry as the stalwarts of the sugar industry in Sindh are frequently meeting to discuss the situation and to find a way out to the prevailing situation.
The shortfall in supplies is bound to affect the volume of production in Sindh. The pinch of the shortfall may not be felt in near future as about 200,000 tons of surplus sugar earlier lifted by the Trading Corporation of Pakistan may bridge the gap.
In view of the fast approaching month of Holy month of Ramazan, the government has already taken precautionary measures to maintain sugar prices by taking the steps of releasing the stock of sugars in the market. Consequently, the rising trend of sugar prices has been effectively checked. At the retail stage, the sugar is being sold at Rs20kg while at wholesale stage it is available at Rs985/- per 50 kg.
Despite all preventive measures the prices of essential commodities like sugar are generally increased in Ramazan as the profiteers managed to engineer a situation for taking optimum advantage of the situation every year.
The sugar industry in Pakistan was unable to compete in the export market due to higher cost of production, which they say renders the industry uncompetitive in the export regime. Although the industry has always been keen to enter into the world market and pressurizing the government for a subsidy for developing a matching price mechanism the government never acceded to which they alleged.
However, under the changing scenario, when the developed economies especially in the European Union have agreed to withdraw subsidy they were offering to agriculture in general and sugarcane crop in particular, there is a possibility that the withdrawal of the subsidy by the developed economy will pave the way for the sugar industry in Pakistan to share the export market in near future.
The current situation was discussed with Arif Habib, the Chairman Karachi Stock Exchange, especially in respect of price stability in the shares of the listed sugar companies, he agreed that certainly with the increased profitability and activity, the share price of the sugar sector will move towards stability, but on the other hand the consumers would have to suffer because of increasing prices due to demand growth.
Since the use of ethanol (industrial alcohal) as an alternative fuel especially for the transportation sector in a major part of the world, there is yet another significant activity of the sugar industry to establish ethanol producing plants to optimize their profits.
Currently there are 11 operative plants producing ethanol, which is a value addition to the molasses so far a by-product of the sugar industry. According to an estimate, currently some 30 million tons of molasses was being converted into the ethanol. There are strong possibilities the production of molasses may take a quantum jump in the years to come as more ethanol plants are being established besides expansion in the existing facilities, the experts say.
Pakistan has a strong industrial base in the sugar sector which has the potential not only to meet the entire sugar requirement of the country but can produce export surplus as well provided supplies of raw material were ensured. Sugar cane crop as every body knows that like rice it is also a water-consuming crop. The industry may face a serious irritants in the face of water constraints which consequently might affect the supplies more adversely in future unless sufficient arrangement were made for supply of water for irrigation purposes. One of the options is to construct big dams to meet the growing demand of water. However, the economy was confronted with current and cross current developments having economic as well as political attachments serving certain quarters of different school of thoughts in this country.