November 24, 2003	Monday	Ramazan 28, 1424

The Pakistan Sugar Mills Association (PSMA) has been agitating for quite some time on the ground that they have a large unsold stock of sugar lying with them and if these unsold stocks are not lifted they will not be in a position to start crushing of sugar cane from the first week of November 2003.

In fact, they had delayed the crushing season last year too up till end November and they threatened to delay the forthcoming crushing season even further this year which is bound to affect farmers and will have adverse consequences for the next year’s wheat crop sowing. This has put extra pressure on the government by the powerful sugar lobby.

The millers did the same thing last year and successfully delayed crushing to their target. The government again tried desperately to get rid of the crisis because of the sensitivity of the issue. In its desperate attempt it had already lifted 100,000 tons of sugar from powerful sugar owners which cost a hefty loss of Rs.600 million to the TCP.

It is interesting that the TCP had purchased this quantum at far higher rate (Rs19-19.5 per kg) at which sugar is available to ordinary consumer in the retail market. It is unfortunate that the government has decided once again to purchase another 200,000 tons of sugar from sugar millers through the same old methodology.

It is any body’s guess that how much it will cost to the national exchequer.

Another part of the story is that the sugar millers are still reluctant to except the government’s generous offer because it had minor conditionality and that is the TCP will purchase sugar from only those sugar millers who start crushing season by November 15 and clear the dues of the growers by that time.

It is simple trade-off because the sugar millers want to do away with their excess stock and the government want to clear the issue of outstanding dues of the growers. The sugar millers in the country are powerful lots and they are accustomed to exorbitant profits of the past. They exploited growers of sugar cane by delaying their payments and in some cases wasted their sugar cane on the mill gate. Farmers were discouraged and many have abandoned sugar cane production due to the humuliating treatment of the millers.

It was inflated profit which motivated politically influential lobby to win every body to establish sugar mills. They prospered at the expense of poor growers and ordinary consumers. The problem started when the installed capacity crossed five million tons mark as the country has the potential to consume around 2.8 million tons of sugar. This is instead of the fact that Pakistanis are the nation with a record of highest per capita consumption of sugar.

The export potential is almost negligible because in our country the process of sugar production is one of the most inefficient. The recovery rate is far below other sugar-producing countries of the world. Even in India, the recovery rate is in the range of 11 to 13 per cent.

The recovery rate in Brazil is far higher which enabled it to be the leader in sugar trade as its stake stood at 24 per cent. On the other hand, Pakistan’s sugar recovery rate is 8.3 per cent.

Sugar millers are themselves responsible for the present crisis because they never tried to be competitive in the international market and always tried to extort a price higher than the international price, and they always used their political clout to win concessions from policy-makers.

The government’s decision to buy sugar is against the spirit of its effort of indulging in busivess activity. The sugar industry has the capacity to produce over 5 million tons and if the government kept its tradition of surrendering to the pressure of the millers than the government may have to buy nearly one million tons of sugar next year. This would put unbearable burden on the national exchequer. The government should ask the millers to export the surplus sugar on their own. This year the government may have to suffer a loss of at least Rs3 billion in the sugar trade. This shows how unjust this action is.

There is no denial of the fact that revitalization of the sugar industry is essential but it is not only the duty of the government rather more important should be the role of sugar millers. Sugar mill owners should show their readiness to play their part which they unfortunately are not doing. The government should restrict any further investment in new sugar mills. The major role has to be played by the sugar mill owners themselves regarding revival of this very important industry.

They should create training facilities for aspiring sugar technologists, establish marketing departments to advice farmers to sow high-yielding varieties of sugar cane and the time of harvesting the crop, which would improve the recovery-rate position. The government can play the role of a facilitator in overcoming the sugar crisis by allocating some funds for R&D facilities rather wasting funds on sugar exports. But direct intervention is undesirable because the recent decision taken by the government will not serve any purpose.

Another problem in sugar production is the absence of downstream industries to utilize the three main byproducts (molasses, filter mud and bagasse).

These byproducts can be used in the distilling industry, fertilizer industry, pulp and paper and particle-board industries. The sugar millers will have to sell these by-products at throughway prices to the confectionery industry (molasses) or bagasse to the bricks industry.

They can get better prices if downstream industries are established. The government should provide incentives for the establishment of downstream industries.

The farmer sows whatever variety of sugar cane is available. It is the responsibility of the agriculture department or the sugar millers to advice the farmers to cultivate high- yielding varieties. There must be categorization for different varieties and each variety should be rewarded with a different price level.

This would provide incentive for cultivation of high sucrose sugar cane. There should be a legislation binding the millers to pay the dues of the farmer within a stipulated time- frame. The millers should not keep unsold inventory at the expense of farmers.

The sugar millers should learn to live with the excess capacity that exists in the industry and should work out some mechanism to deal with the excess stock on permanent basis. The industry should enhance its competitiveness in the international market and follow the formula of the survival of the fittest rather than to get bailed out all the times. It is unfortunate that most of our industrial leaders look for official patronage.This not the way of surviving in a competitive world.