A TALE OF PAKISTAN'S SUGAR INDUSTRY
About production and productivity
By JAHANGIR A. RIND
Dec 13 - 19, 2004
At the time of the independence there were only two sugar mills one at Rahwali, Punjab and the other at Takhat Bai, NWFP. Total quantity of sugar produced during 1947-48 was 7,932 tonnes. Sugar is considered as basic food commodities. Sugar consumption in industrial countries is 45-55 kgs and in developed countries its consumption comes to 30-70 kgs. USSR, India, Brazil, Cuba and the USA are the largest sugar production countries. In Pakistan, sugar is manufactured from sugar cane and sugar beet. Except two mills in NWFP all the mills in the country manufactured sugar from sugar cane.
Sugar cane is cash crop and serves as a raw material for the production of refined sugar and gur. A small quantity of sugar is also made from sugar beet. Sugar is a carbohydrate; sucrose is present in cane and sugar beet, which is separated for commercial use from rest of the plant material by:
* Grinding the cane to extract juice
* Building the juice into syrup thickness and crystallizes.
* Spinning the crystals in centrifuge to remove the last remaining plant material and color
* Crystallizing, drying and packing is final product
In May 1987, the Government of Pakistan announced a new sugar policy for the country. The major feature of this policy was to abolish the zoning system from the 1987-88 crop year. Under this system now the farmers are free to supply cane to any mill they like. They were also free to convert any quantum of cane into gur. At the same time the minimum cane price is to be maintained which the government fixes generally.
Sugar cane production increased 4% per year over last forty years; high support prices and expansion in mills capacity are the main factors for rapid increase in sugar industry.
Increase in cane production occurred primary due to increase in area with little increase in yield. There are tremendous chances or potential for increase in yield. It is not out of place to mention here that Egypt is highest in yield of sugar cane by producing 111,111 kgs per hectare. World average is 63,642 kgs per hectare. The Pakistan yield is 50,279 kgs per hectare.
During fiscal year 2003-2004 sugar cane was sown on an area of 1074 thousands hectares which is declined by 2.4 per cent from last year (1100 thousands hectares). The amount of sugar recovered per ton of cane proceeds depends on the quality of sugar cane and effectiveness of processing in mills.
The foundation of domestic sugar industry was laid down in 1950s with the establishment of four sugar mills, three of which were in public sector. (Pakistan Industrial Corporation.)
The rising trend of imports was the main reason. Sugar industry has witnessed remarkable growth in 52 years. It has cane-crushing capacity of 41 million tonnes per day.
Table No. 1 shows annual production capacity of mills, production of sugar and capacity utilization.
Table No 1
IN 000 TONS
IN 000 TONNES
2004 71-units op*
68 million tonnes
3.999 million tonnes
Source: 1. Ministry of Food, Agriculture & Co-operatives. Agricultural Statistics of Pakistan
Sugar production grew at an average rate of 3.8% per year over the period 1970-86. The growth is visible both in milling capacity and production of sugar. Today there are 77 mills in the country. There are 9 mills in public sector, the production of all most 1/4 of total installed capacity. Existing sugar mills are in the range of 6000 metric tonnes to 40,000 metric tonnes cane crushing capacity per day. Sugar mills operate seasonally. The average crushing season extends for about 6-7 months (September-April) depending upon availability of sugar cane. The normal crushing season is 150 days.
At present 71 units are operative, 5 have been closed and two are under installation. The installation capacity of operative units is finally estimated crushing of 68 million tonnes of sugar cane to produce 6.5 million tonnes of sugar. Sugar production attained on an average at 3.61 million tonnes. It has been performing 56% efficiency leaving 44% capacity idle.
SUGAR INDUSTRY AND AGRI- DEVELOPMENT
Sugar cane occupies 0.94 million hectares of total cropped area of 22.08 million hectares. Sugar cane is one of the major cash crops of Pakistan. Sugar industry and its importance cannot be ignored as it is directly or indirectly involved in development of agriculture. Direct activities include provision of seed, fertilizers, credits, pesticides, and technical advises to cane growers. This is only industry, which is located in rural area. It provides employment to rural inhabitants. PSMA claims employment to 47,000 people directly and about a million over all.
In manufacturing sugar, its by-products such as Biogase and molasses are obtained. Bogasse is used by the industry itself. In sugar mills Bogasse is normally burn as a fuel in boiling houses. Molasses is main commercial by-product, 3/4 is exported with out further processing, rest is sold to distilleries.
Main features of sugar industry are fluctuation in sugar cane production, stagnant recovery and under utilization of capacity.
The sugar industry holds a relatively important position in agriculture, agri-business and consumer's expectations. In agri business sugar manufacturing is second total sale after textile. To consumers sugar is essential food item. Up to 1999 substantial progress made by the industry. The domestic consumption at that time was 3.15 million tonne.
Under utilization capacity reported to be due to crop size not increasing over the year as could be normally expected. The main reason is minimum return to farmer from this crop in comparison of cotton crop. Negative attitude and delaying tactics of industry in payments are also contributed to it. Prompt payment to farmers and timely announce of support prices of cane will surely increase crop size in future.
DEVELOPMENT OF PAKISTAN SUGAR INDUSTRY
The sugar industry in Pakistan grew slowly and gradually. The growth of sugar manufacturing continued in the 1970s, 1980s and 1990s mainly due to considerable protection to domestic sugar production. This was provided through tariff and non-tariff restrictions on the import of sugar. Liberal sanctioning and credit policies helped the home industry to take off easily.
In 1980s, new sugar mills established in private sector.
In 1980-81 they crushed 8.33 million tonnes and in 1998-99, the amount had increased to 27.7 million tonnes. Sugar cane production, sugar cane crushed, percentage of cane crushed and sugar made in last five years have been given in table No. 2.
Table 2PHASE WISE DEVELOPMENT OF SUGAR INDUTRY TOTAL NO OF SUGAR MILLS ESTABLISHED FROM 1950 -2004
Source: Federal Bureau Of Statistic Division GOP (YEAR BOOK)
REASONS OF RAPID GROWTH DURING 1999S
1. As 70 percent machineries and equipments were domestically manufactured by Heavy mechanical complex, Shipyards Engineering and Itifaq Foundries Ltd.
2. High internal sugar prices and depreciation of Pak rupee resulted sugar much cheaply at home.
3. Local industry capability to manufacturing sugar surplus and cheaper than imported cost.
Table No. 3
CRUSHED BY MILLS
IN MILLION TONNES
IN MILLION TONNES
Source: Pakistan statistical year book.
Sugar cane production in Pakistan increased at the rate of 4% over past forty years. High support prices and expansion in Milling capacity are the main factors. Increase in production occurred primary due to increase in area. With little increase in yield.
Table No. 4PROVINCE WISE RECOVERY RATE (%)
Source: 1. Pakistan society of Sugar Technologists & Ministry of Food, Agriculture and Livestock.
Table No. 4 shows highest sugar recovery rate in Sindh Province. It is due to agro-ecological condition in the province for the cultivation, such as large growing season and humid climate.
The average extracting rate 90-92% compares unfavorable with the 98% prevailing abroad.
The amount of sugar recovered per tonne of cane processed depends on the quality of cane and effectiveness of processing. Cane quality is low in Pakistan.
REASONS OF LOW RECOVERY PERCENTAGE.
1. POST HARVEST LOSSES
1.1 Inadequate handling facilities at the mills gate.
1.2 Poor procurement scheduling by mills
2. POOR QUALITY OF CANE PRODUCES
Table No. 5PRODUCTION AND PRODUCTIVITY OF SUGAR CANE CROP
AREA IN 000 HECTARES
PRODUCTION IN 000 TONNES
YIELD PER IN TONNES PER HECTARE
GROSS VALUE ADDED
47324/kgs per ha
Source: 1. Ministry of Agriculture, Food and Live Stock.
Table No. 5 shows that cane production and productivity is increasing gradually and still there is potential of improvement provided growers are encouraged by support price and prompt payment of their cane proceeds. If growers were harassed by delayed payment or in support price the area and expenditure on fertilizer will reduce. Farmers will divert to other crop. And this will certainly effect production of cane as well as it's per acre yield. Pakistan achieved self-sufficiency in sugar in the early 1980s, which did not last very long.
COST OF PRODUCTION OF SUGAR
The cost of production of sugar in Pakistan is very high as compared to other sugar producing countries. That is why sugar is not exported from Pakistan. The cost of production largely determine by sugar cane yield, the sucrose content and sugar processing costs. Other reason of higher cost of production is low capacity utilization. Sugar cane yield in Pakistan are among the lowest in the world.
REASONS OF LOW SUGAR CANE YIELD
In Pakistan climatic condition is not idle, because of extreme in temperature, the growth season is limited and does not provide adequate time for optimum photosynthesis. The drought and frost in (NWFP) also effect adversely on yield of cane.
* Small farm — agriculture
* Disease and pests
* Shortage of irrigation
* Poor siting of mills.
* Lack of extension services
* Lack of high yielding varieties
* Poor agronomical practices, and
* Poor farm yard manuring and application of balance fertilizers (NPK)
Table No.6THE COST OF PRODUCTION PROVINCE WISE --1986
(IN RUPEES PER KG)
Source: Annual reports of sugar mills listed on Karachi Stock Exchange.
A study conducted in 1985-86, estimated sector share of sugar expenditure, Farmers share of consumer sugar purchases 40%, producer 21%, Government Excise Tax 24% whole seller 9% and Retailer 6%.
PSMA Sindh states that sugar cost is determined to extent of 87.11% by the GoP policy. Sugar support prices are fixed by the GoP, which formed in range 65-77 percent of sugar production cost. Like wise operating cost range of 13.52-18.70 percent. Thus average cost of production comes to 87.11 percent. (Sugar cane 71% +16.11production cost) Raw material Rs71 +production cost Rs16.11=87.11
The current cost of production is Rs21 per kg including Sales Tax. (PSMA). Actually farmers are not paid more than rupees 42 per 40 kgs in Sindh, Rs 41per 40 kgs in Punjab and NWFP.
Table No. 7 shows sugar availability, supply and stocks of last four years.
Table No. 7SUGAR AVAILABILITY, SUPPLY STOCKS
In thousands tons
Source: EBR July 19-25, 2004 Daily Dawn
Huge load of unsold stocks creating oversupply. Heavy stocks in hand at the close of each fiscal year created financial problem for Mills. The mills tried to cope with situation by withholding the payment of sugar cane proceeds from farmers of the country. The non-payment created dispute between farmers and mills management. Crisis developed harassed the poor growers and make it difficult to meet their both ends (as sugar cane is long duration cash crop, which remained about 12 to 18 months in the field before procured by mills for crushing and processing).
It created a crisis, which becomes problem for poor farmers, government, mills managements and its association (PSMA) through out the country.
Sugar industry is reported to be well organized. All mills are the members of Pakistan Sugar Mills Association (PSMA). The problem was not resolved until and unless mill's management, and PSMA compelled government to purchased surplus stocks. Thus TCP (Trading Corporation of Pakistan) was directed to procure 100,000 tonnes and 500,000 tonnes respectively during 2002-2003 and 2003-2004 as shown in table No. 7. Source said that TPC and industry have reasonable surplus stock over country's requirement. The reason of high cost of production is poor selection of mills site in area where cane cultivation due to agro climatic condition not suited e.g. Dadu and Larkana sugar mills established in areas, which did not grow cane, and as a result they continued to face problems right from the start. Moreover a number of mills are located very close to each other generally in Sindh and particularly in Badin and Nawabshah districts.
INDIA: In India setting a factory with in a distance of 15 km is not allowed. In the early stages Indian sugar industry not allowed to establish a unit of large capacity now they are free to expand their capacity and also put up higher capacity new units. This is why the Indian sugar industry is free from under capacity problem. The minimum cane price is always announced by Indian government well before growing season, which is Rs73 per Qtl. The increase in area and production is clearly visible. The area sown in 1966-1970 was 2449,000 acres where in 2001-2002 it was 4400,000 acres. In 1999-2000 gross cropped area in India was 1897.40 lakh hectares. Out of which area sown under cane crop was 44.03 lakh hectares, which comes 2.27% of cropped area.
Table No. 8 shows distribution of sugar mills with cane crushing capacity and sugar production per unit in various countries.
Table No. 8
AVERAGE CANE CRUSHING
PER DAY TONNES
AVERAGE SUGAR PRODUCTION
PER UNIT TONNES
Source: Indian Sugar Mills Association
* Reduction in post harvest losses and effective processing may increase recovery percentage of sugar.
* Exemption of sales tax, like other food items may also provide relief to consumer especially poorhouse holds. It also reduces stress on industry regarding cost of sugar.
* Increase in crop size may be achieved by announcing minimum cane purchase price before sowing of crop.
* Increase in production and productivity can be increase by insuring timely supply of inputs, credit and technology by mills and other institutions of country. Mills in their areas may assure for supply of quality seed suited for the area.
* PSMA claiming definite sugar policy and structure to govern to sugar sub-sector for sustainable economic future and flourish but it should not be at cost of growers.
* Each mill itself instead of depending on government arrange research and development programme for cane cultivation improvement in the vicinity of each mill.
* Large-scale farming or corporate farming may achieve increase in production and productivity of cane.