THE crushing of cane, which must start on October 1 under law, has yet to formally begin even after three months because of an unresolved dispute over the support price between mill owners and growers.

However, things now appear to be moving in a new direction in the wake of the Sindh government’s offer to re-fix the price. Earlier, the official machinery had failed to bring about an amicable settlement between mill owners and growers owing to the industry’s uncompromising attitude.

After failing to obtain relief from the Sindh High Court, the mill owners — who have strong presence in the legislatures — decided to take their case to the Supreme Court. Their case is being contested by senior lawyer Abdul Hafeez Pirzada. Another senior lawyer, Raza Rabbani, is pleading the farmers’ case.

The Supreme Court will seek the litigants’ opinion about the Sindh government’s proposal when it takes up the case. During the last hearing, Sindh’s advocate-general had said the provincial government was ready to revise the price of sugarcane to Rs168-170 from Rs182 per 40kg if it was acceptable to both millers and growers. This offer can be adjusted to make it acceptable to the two warring sides.

The court, however, was of the view that the government should develop some parameters or guidelines for fixing the purchase price of sugarcane, and that all stakeholders, including the growers, should know in advance the factors that would determine the purchase price.

Farmers in Punjab and KP are being paid the officially fixed procurement price of Rs180 per 40 kg by the sugar mills. It is difficult to understand why mill owners in Sindh alone are behaving differently

The millers, who are more keen to export sugar than sell it for cheap to the common man, complain that the minimum price of sugarcane has been fixed at a higher rate every subsequent crushing season for the past several years, but the price of refined sugar has plummeted both internationally and domestically and remains unregulated.

The Sindh government has shown a lack of firm resolve to put the industry’s affairs on the right track by taking decisions under the pressure of the concerned parties. According to a notification issued on November 11, it increased the minimum price of sugarcane to Rs182 per 40kg at the behest of the Sindh Abadgar Board.

The price was fixed at a meeting of the Sindh Sugar Factories Control Board. The mill owners refused to accept the new price as their cost of production has become much higher than the sale price.

Raza Rabbani accused the mill owners of working ‘like a cartel,’ which, he said, is evident from the fact that all of them closed their mills for 15 days as a pressure tactic after the Sindh High Court upheld the provincial government’s decision to fix the price at Rs182.

Later, the provincial government revised it to Rs155 to appease the sugar industry. But it was opposed by the federal government, and when federal minister Sikander Hayat Bosan described the revised price as ‘unjust, unfair and arbitrary,’ the provincial government came under pressure and again changed the price back to Rs182.

The delay in the crushing of sugarcane often delays the sowing of the wheat crop, which takes place during November-December. This can have a double-whammy effect: it would lead to a reduction in wheat output, and also discourage sugarcane growers, some of whom may opt for other kharif crops like rice and cotton. The delay in cane-crushing has become an annual feature in the country, and can lead to a decrease in sugar production over the years.

It is interesting to note that farmers in Punjab and KP have had no such issue and are being paid the officially fixed procurement price of Rs 180 per 40 kg by the sugar mills, and the crushing of cane is proceeding steadily. It is difficult to understand why mill owners in Sindh alone are behaving differently.

The Economic Coordination Committee of the Cabinet, in its meeting on December 24 had approved the following package for the sugar industry: a quota of 650,000MT of sugar to be exported by May 15, (the mill owners claim to have 1.2m tonnes of surplus stock and want to export it to avoid losses and ensure payments to growers); the imposition of a 20pc regulatory duty on the import of raw and beet sugar; and the fixation of a minimum price of $450 per MT for export to Afghanistan.

The ECC also approved the inland freight subsidy of Rs2 per kg, and a cash subsidy on sugar exports of Rs8 per kg. The total cost of the subsidy, amounting to Rs6.5bn, is to be borne by the federal and provincial governments as per the location of the sugar mills, on a 50-50 sharing basis.

The government has estimated sugarcane production at 64.74m tonnes on an area of 1.13m hectares in the 2014-15 fiscal year. According to the industry, sugar production will clock in at 5.7m tonnes, against 5.5m tonnes a year earlier. Local sugar consumption stands at around 4.7m tonnes. Sugar crushers intentionally delay the crushing to increase their production.

Published in Dawn, Economic & Business, February 2nd, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play