HYDERABAD: A whopping over Rs44 billion is outstanding against Sindh-based sugar millers under quality premium’s head since 1998-99 to 2018-19 sugar cane crushing seasons, which are to be paid to cane producers in line with court directives.

The amount was calculated by the Sindh cane commissioner in line with a Sindh High Court’s Dec 19, 2019 order passed in identical petitions filed by growers’ bodies, seeking implementation of the apex court’s Mach 5, 2018 order.

Through its March 5 order — authored by Justice Faisal Arab — the Supreme Court (SC) rejected an appeal of sugar millers challenging SHC’s March 22, 2003 order, dismissing millers’ petitions whereby they had challenged quality premium in Sindh. The apex court suspended March 22, 2003 judgement on Feb 19, 2004 while issuing a stay order.

Dues of quality premium were now assessed and sent to sugar mills so that they could reconcile it with the cane commissioner who has to submit his report before a division bench of the SHC. According to Cane Commissioner Javed Sibghatullah Mahar, “mills can reconcile amount which is over Rs44bn so that the SHC can be informed”. He told Dawn that the amount had been sent to each sugar factory. “Now each sugar cane grower has to approach concerned mills along with cane purchase receipt (CPR) for verification to claim [quality] premium as per the court order,” he said.

He has made the calculation on the basis of tonnage of sugar cane crushed by each mills between 1998-99 to 2018-19 seasons. Each sugar mill reports different ratios of sucrose recovery in the sugar cane season to the government, considering benchmark sugar recovery of 8.7pc. The quality premium is assessed on each 0.1pc of excess recovery of sucrose achieved by mill over and above base recovery of 8.7pc. The rate of quality premium is 50 paisa per 40kg for each 0.1pc. It is paid due to increased sugar recovery in Sindh’s sugar cane in addition to minimum procurement price the government notifies annually.

Such a huge amount of a little over Rs44bn is largely on account of increasing number of sugar mills in Sindh. These used to be around 20 till the 1990s and since then their numbers kept increasing. Only until recent past mills used to be 32 in number and now Sindh has 38. But factories which are currently functioning are around 34 as remaining have different kinds of technical or financial problems.

In view of March 5, 2018 judgement, sugar factory owners were to pay premium “not later than two months after crushing season comes to an end” for 2018-19 season. But they did not pay it as usual. Growers’ bodies, Sindh Growers Alliance and Sindh Abadgar Board (SAB), had filed identical cases in the Sindh High Court for implementation of March 5, 2018 SC judgement. Through Dec 19, 2019 order, the SHC disposed of petitions with a consensual order in the presence of counsel of factory owners and growers.

Wealthy millers have been arguing that it was only in Sindh where quality premium is recovered from them, otherwise no province has such provision. The provision is covered under Sugar Factories Control Act 1950 which was amended in 2009 after the Pakistan Peoples Party (PPP) formed its federal and Sindh governments.

The amendment, the growers said, was made to suit millers beca­use the amended law now enabled millers to start crushing not later than Nov 30 whereas in the pre-amended act, a sugar factory was required to start crushing sometime in October. Considering new deadline of Nov 30, the millers leisurely start crushing by mid or late December to maximise extraction of sugar recovery despite the fact that sugar cane crop gets matured by October.

Only two weeks back in Dec 2019 around 12 sugar mills — mainly of lower Sindh region — had suspended sugar cane crushing while contending that they were not getting sugar cane supplies from growers. But a couple of days ago, Pakistan Sugar Mills Association Sindh zone chairman Dr Tara Chand confirmed while talking to this correspondent that most of those 12 mills had resumed sugar cane crushing process. “We didn’t resist Rs192/40kg notified this year for procurement of crop,” Dr Chand had stated earlier.

Reports, however, indicate that these 12 mills had to resume crushing because sugar mills located in middle Sindh like Nawabshah, Khairpur or Sukkur did not suspend their operations and these mills were lifting sugar cane from lower Sindh, a sugar cane growing area. So these dozen mills had no option but to start crushing to capitalise on much anticipated increase in sugar’s price in the retail market.

The growers felt that sugar millers suspended their operations on flimsy grounds of ‘no sugar cane supplies’ although farmers were providing crop to them. Some farmers did concede that supplies’ quantum had not picked up momentum as it always takes some time before fuller supplies are ensured.

Sugar millers after starting crushing for 2019-20 season had started offering Rs230 to Rs240 per 40kg and shortly afterwards they reduced the rate to Rs192/40kg which was notified by the Sindh government. Due to sudden fall in procurement price, the growers had reduced their supplies so that millers jack up their offers.

“It was for the first time that millers are readily agreeing to pay notified price of Rs192/40kg because this rate suits them, otherwise historically millers never ... agreed to a notified price which was fixed at Rs182/40kg,” said Sindh Abadgar Board vice president Mahmood Nawaz Shah.

He said that sugar price is to jack up in view of lesser sugar cane production and sweetener price in international market. He said that it was on account of price regime that millers agreed to an increase of Rs10 of per 40kg sugar cane price this year (from Rs182 in 2018-19 to Rs192 this year), otherwise this price of crop should have been fixed at Rs202/40kg for 2019-20.

Published in Dawn, January 7th, 2020