SUGAR mill owners have once again resorted to delaying cane crushing this season, as they did in the past years, to the detriment of sowing of wheat crop, which begins from November 1.

Under the Sugar Factories Control Act 1950, sugar mills are required to start crushing in Sindh from October 1 and in Punjab by November 1.

The mill owners were able to get legal protection for delaying cane crushing. On November 13, the Sindh High Court restrained the authorities from taking any ‘coercive action’ against sugar millers ‘for not commencing sugarcane crushing by the deadline set by the provincial government. The revised deadline was November 15.

The mill owners argued that the 1950 law imposes unreasonable restrictions on them and requires them to sell sugar at a loss as government arbitrarily fixes the minimum price of sugarcane.. This is in contrast to the Sindh Chamber of Agriculture’s statement of November 17 that the fixation of minimum rate of Rs182 per 40kg announced on November 7 was a consensus decision of both the millers and the farmers but now the millers were trying to block its implementation.

The petitioners also questioned the legality of a provision in the 1950 Act that gives the provincial government powers to ‘unilaterally’ fix a minimum price of cane. They argued that it was envisaged in the prevailing national sugar policy that price of refined sugar ‘shall be determined by free market’. Therefore in prevailing circumstances, that provision has become ‘redundant’ and should, therefore, be struck down.

Some 10 new sugar mills have come up during the last three to four years. A couple of them began their production last year. It shows sugar production is a lucrative business

The millers pointed out that the governments while regulating the price of cane tend to increase it. But the price of sugar in the market remains unregulated and is still hovering near and around the three-year old price of Rs52-53 per kg in retail. As a result, the increased support prices are pushing up the cost of production, putting some mills in financial trouble.

But Sindh Abadgar Board is of the opinion that the mills are running in profit. They do not include profits they make from molasses and ethanol while showing their profit and loss accounts. Some 10 new sugar mills have come up during the last three to four years. A couple of them began their production last year. It shows sugar production is a lucrative business.

A study conducted by Lahore University of Management Sciences about payment of income tax by sugar mills shows that there is huge under reporting of output by the sugar mills. Since the total output value reported is often less than what is actually produced, the total profit and income declared by the mills is also less than what they actually earn.. The Federal Board of Revenue should collect approximately Rs14.8bn corporate tax per annum from sugar industry, keeping in view the corporate rate of 34pc and total profit of the sugar sector which comes to around Rs43.5bn.

Finance Minister Ishaq Dar, who met a delegation of the Pakistan Sugar Mills Association on November 1, pointed out that the welfare of farmers and consumers could not be ignored as in certain cases the farmers have not been paid their dues for as long as four years. The association must ensure that all dues were paid to the growers and that the crushing process was initiated on time.

The millers told him that they had 1.2m tonnes of surplus stock and they ‘had no option’ but to export it to ‘avoid incurring losses, and ensure payments to growers’. Dar referred their demand for export to the Economic Coordination Committee of the cabinet for an appropriate decision. Later, the ECC allowed export of only 500,000 tonnes of sugar and imposed 20pc regulatory duty on its import. Later, two mills began cane crushing in Sindh. In all, there are 87 sugar mills in the country.

Cane crushing is said to be intentionally delayed to increase the production of the sugar mills. The delayed crushing helps mill owners in recovering higher quantity of sugar from cane, as more mature the cane the more is the chance of better sugar recovery. Average recovery of sugar from the cane stands at 9.5pc as mills produce an average 9.5kg sugar from 100kg of cane.

Published in Dawn, Economic & Business, December 1st , 2014