PAKISTAN SHOULD ABSTAIN FROM BUYING REFINED SUGAR
SHABBIR H. KAZMI
Mar 16 - 22, 2009
Ill-timed sugar import impairs mills operation, delays payment to growers and erodes foreign exchange reserves. In response to a tender for 50,000 tons of sugar the Trading Corporation could get bids for 25,000 tons at around US$ 452 per ton C&F Karachi. The landed cost will be around Rs 40 per kg without sales tax. If sale tax of Rs 5 per kg is added the cost would touch Rs 45 per kg. The government plans to sell imported sugar from Utility Stores at a price of Rs 40 per kg. As against this local sugar mills are selling sugar at Rs 38.50 including Rs 5 per kg sales tax.
It may be recalled that lately the Economic Coordination Committee (ECC) approved import of 200,000 tons refined sugar through the TCP. The corporation was instructed to import sugar in manageable quantities and tender for 50,000 tons. Many sector experts fail to understand the logic behind import of refined sugar at this juncture, when crushing is going on.
They are critical of the decision because instead of finding a sustainable solution every year government opts for import of sugar. They also disapprove import of refine sugar, which costs more as compared to raw sugar.
According to Abdul Wajid Arain, Chairman, Pakistan Sugar Mills Association (Sindh Zone), "We fail to understand the logic behind policy being followed at federal and provincial levels. There is a pressure on mills for containing ex-mill price of sugar but no support is extended to mills for ensuring supply of sugarcane at support price fixed by the government. As against support price of sugarcane fixed by the government at Rs 81 per 40kg for Sindh, mills are being forced to pay up to Rs 130 per 40 kg."
According to an owner of a sugar mill, "Due to persistent shortage of sugarcane over the last many years, a new breed of mediators has emerged. These are influential people of the areas, who also claim to be the big sugarcane growers. They get indents in their names at higher price and against these indents procure sugarcane from small farmers at a very low cost. The result is that the mills and growers are being fleeced by the mediators."
"Most of the people involved in making decisions regarding sugar industry do not understand dynamics of this industry. They never miss a chance to accuse mills of exploiting growers, but keep on increasing sugarcane support price. Unless efforts are made to double sugarcane production in the country, millers would continue to incur loss and government would be forced to spend millions of dollars on import and to pay subsidy. The prudent option is to convince the growers to improve yield and also provide the necessary inputs at competitive prices," Arain said.
ENHANCING SUGARCANE OUTPUT
It is on record that shortage of sugarcane has kept capacity utilization around 50%, which results in higher cost of production and losses of sugar industry. Therefore, unless sugarcane production is doubled in the country 'sugarnomics' cannot be improved. However, this objective cannot be achieved because of fragmentation of industry.
Industry is divided into two groups one from Punjab and other from Sindh. Ironically, with the politicization of this industry these groups compete with each other and therefore cannot develop a consensus. In the prevailing scenario at time political power is used to get sugarcane. It is on record that efforts were made to stop operation of rival mills.
Incidentally, the politicians not only own mills but are also the major growers of sugarcane. Therefore, every year they succeed in convincing the government to enhance sugarcane support prices in the name of rising input cost. However, they have never tried to optimize the cost by achieving higher yield. Is it not pathetic that sugarcane yield in Pakistan is half of the yield achieved in India?
Ironically, millers often accuse the government for not taking prudent and timely decisions. However, only they can be blamed for the prevailing state of affairs. Gone are the days when they had collective approach. At times it seems that they are least interested in running the mills. Losses of mills are mounting; growers are not being made timely payment and PSMA forum has lost its effectiveness.
Indulgence of many federal and provincial ministries and district governments in the affairs of sugar industry further complicates the problems. While every institution wants to keep sugar industry under its claws, none is ready to help in resolution of outstanding problems.
For years sugar industry has been suffering due to low capacity utilization but no effort has been made to enhance sugarcane availability. Enhanced sugarcane production will not only help in bringing down cost of production, but can also help in generating extra electricity by sugar mills at nominal cost and producing ethanol for blending with petrol and saving foreign exchange.
The government should also facilitate establishing refineries at the sugar mills for producing value added products from molasses. At present bulk of the locally produced molasses is exported and products produced from it in other countries are imported.
Sindh provincial government and district governments where sugarcane is cultivated must try to resolve problems facing sugar industry. While making any attempt to improve sugar industry it must be kept in mind that growers and mills have common interest. When farmers grow extra sugarcane, mills operate for more days and the ultimate beneficiary are workforce. In Sindh, climatic and soil conditions are more conducive for the cultivation of sugarcane.
Therefore, grow more sugarcane campaign must initiate from Sindh to eradicate poverty from the province, particularly the rural areas.