THE Sindh government has paid a hefty amount of Rs3.89bn as subsidy — at the rate of Rs12 per 40kg — to sugar mills to help them pay growers Rs172 per 40kg of sugarcane for the 2014-15 season.

The decision to provide the subsidy was taken after the millers had refused to pay the official support price of Rs182, arguing that it was unaffordable for them.

The funds were released for the 41,065 registered sugarcane producers, according to the Sindh Cane Commissioner Office’s record. Out of 37 sugar mills in the province, only 33 had resumed crushing sugarcane. Barring five units located in Sukkur and Ghotki districts, the remaining 28 mills didn’t agree to pay the official price of Rs182. Nine sugar mills are said to have made full payment to 18,037 farmers after getting the financial assistance.

“The sugar industry is largely a political industry enjoying patronage. We should import sugar and it will cost us cheaper than the domestically produced one,” says Dr Kaiser Bengali

Cane Commissioner Agha Zaheer said 70pc of the remaining 23,028 farmers have now also been paid, while the 6,900 or so growers would soon get their payments as well. The provincial government is seeking details from each mill to see the break-up of the payments in writing, he said.

This is a misuse of governmental discretion to spend taxpayers’ money, which could have otherwise been utilised for development programmes instead of supporting sugar millers who had already obtained other concessions from the federal government. They received a Rs10 per kg subsidy on the export of 650,000 tonnes ($100 per tonne), which may cost the government Rs6.5bn.

Besides, market prices of the sweetener continue to surge. Currently, the wholesale market rate in Hyderabad is Rs62 per kg.

“It is an absolutely unjustified use of subsidy as it is the public’s money after all. The sugar industry is largely a political industry enjoying patronage. We should import sugar and it will cost us cheaper than the domestically produced one. The price can be verified from international agencies’ reports,” argues eminent economist Dr Kaiser Bengali.

“The ownership of mills in Punjab varies in sharp contrast to Sindh, where a strong monopoly is deeply rooted. It is the consumers who pay for it.” He says the industry is economically unviable, and adds that sugarcane needs excessive water that renders agriculture land water-logged.

Punjab and Khyber Pakhtunkhwa dealt with the issue differently and their farmers got the official support price. The situation in Sindh remained altogether different, where growers ended-up as the ultimate sufferers. This happened in spite of the fact that Sindh’s benchmark of sucrose content (8.7pc) is more than that of Punjab (8.53pc).

According to Sindh Abadgar Board (SAB) President Abdul Majeed Nizamani, the recorded average sugar recovery was 9.44pc in the last two decades. Small farmers often don’t get a premium price if the recovery remains higher than the benchmark.

The general perception is that the Sindh government deliberately did not enforce its notification of the Rs182 per maund price only to benefit a particular political group that owns a large number of mills.

“We strongly oppose the misuse of public money as there is no justification for it. The sugar industry is not financially unviable in Sindh. It is expanding at a time when other industries are witnessing a downturn. Either new mills are being set up, or the existing ones are raising their crushing capacity. Secondly, the mills have added value to their business. They are producing electricity by using bagasse and sell electricity to the power distribution companies”, he said.

Sindh’s farmers had actually demanded a price of Rs200-210 per 40kg as they said their cost of production had gone up. Eventually, they had agreed at Rs182. And while the millers and the farmers were discussing sugarcane’s price last year, sugar’s wholesale price was around Rs52-54 per kg; currently it is Rs62.

As crushing got delayed, small sugarcane growers (who needed cash) supplied sugarcane at Rs150-155 per 40kg; but the big landowners did not. The government finally talked to the growers’ representatives in mid-March and decided to pay Rs12 per 40kg to millers for onward transfer to the farmers. In lieu of this, the factory owners were told to raise their rate by Rs5 per kg so that the farmers received Rs172 — a rate that has been fixed for the last two years in the province.

Sindh Chamber of Agriculture General Secretary Nabi Bux Sathio has urged sugar millers to withdraw their appeal from the apex court and pay the differential amount of Rs10 per kg to farmers, as the sugar price has considerably increased while the exports were open until last month.

“In the view of the present situation, there is no logic to disburse Rs3.89bn among millers, which can otherwise be used for the larger good of the people.”

Published in Dawn, Economic & Business, August 3rd, 2015

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