SUGAR INDUSTRY IN PAKISTAN
Research Analyst, PAGE
Aug 31 - Sep 06, 2009
Sugar industry is one of the major industries of Pakistan. It not only contributes billions of rupees every year to national exchequers on account of sales tax, income tax and but also directly helps the growth of rural economy through purchase of sugarcane and extending financial and technical assistance to the farmers for the development of cane crops.
Today, Pakistan has 86 sugar mills, 45 in Punjab, 33 in Sindh and 8 in NWFP. The installed capacity of these sugar mills is about seven million tons.
Pakistan's 2009/10 sugar production is projected at 3.65 million tonnes. Consumption is projected at 4.35 million tonnes and imports at 730,000 tonnes. Trial production of sugar beet has proven successful but industry is reluctant to encourage expanded production due to technical and administrative challenges.
CRUSHING, PRODUCTION AND RECOVERY % IN 2008-09
|PROVINCE||CANE CRUSHED TONNES||SUGAR MADE FROM CANE TONNES||
|MOLASSES PRODUCTION TONNES|
|N.W.F. P (CANE)||2,313,725.00||193,768.00||8.37||-|
|Sugar Beet (N.W.F.P)||9,301.00||947.00||10.18||419.00|
Pakistan's sugar industry produces more than half a million tones of ethanol per annum from cane molasses, over 50 per cent of which is exported to Europe, Far East, and Middle East countries.
During the Marketing Year (MY) 2008/09, sugarcane production was at 53.7 MMT down about 16 percent from last year's production level. Lower production is largely attributed to the cyclical nature of sugarcane production in Pakistan. Growers were also discouraged as a result of last year's poor market performance (e.g. the issuance of cane supply indents), increased mistrust of weight/measurement scales employed by authorized factory stations, the late start of the crushing season which limited farmers' wheat planting options, and above all, delayed payments. Improved profitability of alternative crops such as rice and sunflower has further motivated farmers to shift area away from sugarcane.
SUGARCANE AREA AND PRODUCTION BY PROVINCE
|PROVINCE||AREA ('000' hectares)||PRODUCTION ('000' MT)|
MY 2008/09 sugar consumption increased by 4.3 MMT due to an increase in population and increased demand for sugar-based products. Total per capita refined sugar consumption is estimated at about 25 kilograms per year, reflecting improved domestic supplies and strong demand. Retail sugar prices are forecast to hover around Rs. 45 per kilo. The GoP maintains a 15 percent regulatory duty on raw sugar imports, a 16 percent general sales tax, and one percent excise duty.
MY 2008/09 sugar imports were estimated at 700,000 MT. Imports are largely handled by the private sector. In an attempt to support the domestic crushing industry and ensure an adequate supply of sugar for consumers, the Pakistan Sugar Mills Association (PSMA) has demanded that the government immediately eliminates the 15 percent import duty on raw sugar and ban imports of refined sugar. To date, no such action has been taken by the government.
Today, the country is facing one of the worst sugar crisis in the history of Pakistan. The shortage, triggering this crisis, has been created because of hoarding and hedge marketing by the sugar millers and hoarders. Federal government has succumbed to the pressure tactics of the sugar mafia by maliciously inflating the prices and passing on the burden, once again, to the poor majority of the country.
The pretext for hiking the sugar prices offered by the millers is that international market rates have gone up, whereas the sugar mills procure all the raw materials locally and pay local prices to sugar cane growers.
PROBLEMS FACING THE SUGAR INDUSTRY
The production of sugarcane does not match with the capacity of mills because of low productivity. Sugar mills cannot survive without sugar cane, which is an important raw material of the industry. Similarly, sugarcane growers cannot survive without sugar mills because sugar mills use their outputs. Both are inter-dependent. However, the relations between these two main stakeholders are not complementary to each other because of several reasons. For instance, when sugarcane crop is on high farmers suffer due to delayed payment by the sugar mills as well as deduction from the cane. And, when the production of sugarcane is on low, then mills suffer because they have to pay more to obtain cane to keep the mill in operation.
In such a situation a third party, the middle harvesters become beneficiary by exploiting both the stakeholders. This not only disturbs the industry but also affects the overall economy because the industry is forced to import sugarcane at high price. Unfortunately, even when sugar is in surplus, it is difficult for sugar industry to export because it is not competitive in the international market due to higher cost of production.
Sugar industry and the government must look into the critical issues and should work out a proper mechanism for establishing cordial relation between the mills and the growers and to eliminate intermediaries. In this way, a better result can be produced to benefit the industry, grower, and consumer.