THE Sindh government finally notified sugarcane price of Rs172/40kg for 2015-16 crushing season on January 3. It is for the first time that the province has deviated from its past practice of fixing cane price a few rupees higher compared to Punjab’s rate, despite better sucrose recovery in Sindh.

From growers’ point of view, the Sindh government seems to have set a bad precedent by fixing the sugarcane price downward. They fear it is likely to be exploited by the millers as a benchmark in the future. The Punjab government has retained last year’s sugarcane procurement rate of Rs180/40kg.

Growers allege that the Sindh government has buckled under pressure from a particular group of millers from lower Sindh region.

An advertisement by the Sindh zone of Pakistan Sugar Mills Association states an agreement was reached last year between the growers and the Sindh government under which the millers were to pay Rs160/40kg and the Sindh government Rs12/40kg to the growers. The apparent underlying assumption is that this formula still holds ground and that they would pay Rs160/40kg.

While 34 sugar mills are crushing cane out of 38, factories in upper Sindh are paying Rs180/40kg to cane producers, according to the information provided by growers’ bodies. Mills in lower Sindh — Hyderabad and Mirpurkhas divisions — are controlled/owned by a powerful group which influenced the Sindh government to delay notification that is likely to be challenged now by growers.

Lower Sindh sugar factories are insisting on paying Rs160/40kg while their upper Sindh counterparts are paying Rs180/40kg

Lower Sindh sugar factories are insisting to pay Rs160/40kg regardless of the fact that their upper provincial counterparts are paying Rs180/40kg. Five mills in Ghotki have started paying Rs180/40kg considering their geographical proximity with Punjab because producers could sell cane to Punjab’s mills, according to market reports.

An identical price trend of Rs180/40kg is reported from Khairpur and Naushahro Feroze as per Sindh Chamber of Agriculture’s information. But the lower Sindh factories are unmoved by it.

Before the commencement of the crushing season, Sindh Chief Minister Syed Qaim Ali Shah had made it clear that the one-time subsidy was only for 2014-15 season and millers should not expect anything of the sort in fiscal year 2015-16 and advised both milers and growers to negotiate an agreed price..

“We strongly believe that the Sindh government is a party to it in this issue. Even January 5 advertisement clearly challenges the provincial government’s writ that issued a notification that is not acceptable to us and we are going to challenge it before the high court”, argues Mahmood Nawaz Shah, who is actively engaged in dialogue with millers and the government.

According to Sindh Chamber of Agriculture General Secretary Nabi Bux Sathio the government has damaged the growers’ cause by issuing this notification which would become a precedent against them. He said the millers’ own admission is that last ten year’s recovery of sucrose content in Sindh’s sugarcane was recorded at 9.7pc against its benchmark of 8.7pc. “And this ratio of recovery also negates millers’ claim that farmers are cultivating sugarcane varieties that have less sucrose content”, he said.

A senior Sindh agriculture department officer points out that as per millers’ own assessment average sucrose recovery in Sindh was 10.5pc in 2014-15, Punjab’s 9.5pc and KP’s 8.5pc “Even a PSMA office-bearer’s own mill pays Rs180/40kg in KP”, he says.

An assessment of sugar production expenses by mills — assessed by agriculture department — indicates that the cost of per kilogramme sugar production is Rs46.50 if one maund of sugarcane (procured at Rs160/40kg) is crushed and 4.20kg of sugar is produced out of cane. The sweetener’s ex-mill price varied between Rs52/1kg to Rs60/1kg in last season. Comparatively, 3.75kg of sugar is produced in Punjab out of one maund of sugarcane, bought at Rs180/40kg last year.

A figure work with an agriculture officer shows that sugarcane was purchased last year at Rs160/40kg in Sindh. The.20kg of sugar, as per millers’ admission, is sold at an average ex-mill Rs52/1kg though ex-mills price has gone up to Rs60 then overall sale price comes to Rs218.40 against sugarcane procurement price of Rs160/40kg. It indicates saving of Rs58.40 on crushing of 40kg sugarcane.

Besides, molasses — used for value addition — is sold at more or less Rs12/1kg by a factory. Around 1.80kg of molasses is produced in one maund of cane, indicating another Rs21-22 earning apart from that obtained from byproducts like bagasse, ethanol and energy productions. Yet, millers insist that a price of Rs172 or Rs182 is not affordable for them despite the fact that their counterparts in Sindh and Punjab are paying it comfortably.

Published in Dawn, Business & Finance weekly, January 11th, 2016