Sugar has never been a sweet subject for policymakers because it is a highly sensitive and politicised commodity.

To safeguard the interest of growers, the provincial governments fix the minimum support price of sugarcane — which has never gone well with the sugar industry.

The industry insists that the government should either regulate or deregulate the mechanism for fixing the price of cane and of sugar. By fixing or controlling the price of both items, the industry says it is put at a disadvantage, and this often results in delaying of payments to growers.

To increase productivity, the industry’s representatives say the sugar mills have undertaken value-addition by converting molasses into ethanol. There was a time when Pakistan used to export molasses at throwaway prices, fetching no more than $50-$80 per tonne. But the country now earns huge foreign exchange by exporting ethanol, which fetches around $800-$850 per tonne.

The industry claims that its units are upgrading their systems to keep operations efficient and cost-effective. However, they blame successive governments for not introducing crop management practices to growers to enhance per acre yield, which is among the lowest in the region.

“If India could achieve a high yield of up to 1,000 maunds per acre, why is Pakistan lagging behind with a low yield of around 500-600 maunds per acre?” wondered a sugar mill owner.

The government would only be required to rationalise the price of sugar with that of sugarcane, and both growers and millers will have a win-win situation — Ahmed Bawany, chairman of the Pakistan Sugar Mills Association, Sindh

The problem is that India gives a huge amount of $6.6bn in subsidy to growers, and its sugar industry got loans at zero mark-up for three years.

Pakistan, with its huge foreign debt, is not allowed by international lending agencies to give subsidy to any sector, including agriculture, and this has made most of our commodities uncompetitive. Another major factor which makes Pakistani sugarcane and other crops costlier than India’s is the high cost of input, including that of fertiliser and pesticides.

For the 2014-15cane-crushing season, the Punjab and Khyber Pakhtunkhwa provincial governments fixed the cane price at Rs180 per 40kg, and the Sindh government at Rs182 per 40kg.

But in a sudden move, the Sindh government de-notified the earlier price on December 4 to Rs155, inviting strong protest from growers. However, Sindh Chief Minister Syed Qaim Ali Shah responded by reverting the support price back to the previous rate of Rs182 per 40kg.

Sindh Chamber of Agriculture (SCA) vice-president Kabool Mohammad Khatian told Dawn over telephone that the cost of cultivating sugarcane comes to around Rs152 per 40kg, and if the provincial government kept the support price at Rs155, it would merely have covered farmers’ input cost.

As a result, around 20m-30m growers and haris of Sindh would have suffered at the hands of 35 sugar mills, which are mostly owned by political stalwarts of the province, he said.

While provincial governments were fixing the support price for cane in the past, the federal government directly controlled the price of sugar. But after the 18th amendment, both are now provincial subjects.

When sugar was a federal subject, Khatian said, subsidy was given on on exports, which indirectly compensated the millers. But currently, there is no such cushion from the provincial governments. Instead, the poor growers are made to pay the price.

Ahmed Bawany, chairman of the Pakistan Sugar Mills Association, Sindh, said the issue could be sorted out in no time if the government is serious in resolving it. The government would only be required to rationalise the price of sugar with that of sugarcane, and both growers and millers will have a win-win situation.

However, this could not be done by controlling and fixing the prices of sugar and cane. The government will either have to deregulate or regulate both the commodities, and only then a real solution could be reached, he maintained.

He said the industry fully understands that its survival is directly linked with that of cane growers. “We do not want farmers to suffer at any cost. They should keep cultivating more and more cane so that the wheels of industry could move faster,” he added.

“We have been telling the government to give us the processing cost. We will crush the cane and give white refined sugar, which could be sold by the government in the open market at any price.”

However, Bawany suggested that there is an urgent need to evolve a sugar policy to achieve higher cane output and produce an exportable surplus of up to 5m tonnes. This will help the country not only earn huge foreign exchange, but also cover the cost of the sugar industry.

Iskander Khan, central chairman of the Pakistan Sugar Mills Association, told this writer over telephone from Peshawar that the sugar price does not cover the cane price of Rs180 per 40kg announced for KP and Punjab.

He suggested that the cane support price should be fixed at Rs150 per 40kg and the government should give a subsidy of Rs30 per 40kg to growers at the time of procurement.

He also warned that the system will collapse within the next 30 days because millowners would stop paying growers as they would not be able to bear the high cost of cane with no return.

Khan urged the federal government to immediately allow the export of 0.5m tonnes of sugar out of the 2m tonne exportable surplus estimated for the current season.

Published in Dawn, Economic & Business, December 15th , 2014