Sugar industry conundrum

January 20, 2020

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A BIG question mark hangs over the viability of Sindh’s sugar industry amid a yawning gap between mills’ crushing capacity and the supply of sugar cane.

The existing cumulative crushing capacity of sugar mills in Sindh stands at 253,300 tonnes per day, or a little over 90 million tonnes a year. Compared to this, sugar production in the province was 16.691m tonnes against the target of 18.752m in the last season (2018-19).

At the same time, the number of sugar mills increased from 28 in 2007 to 38 in 2017. However, the area under sugar cane cultivation and sucrose content recovery have remained almost the same.

It has been a few years now that the provincial government has capped the establishment of new sugar factories. Even then, it is becoming increasingly difficult to meet the demand of such a large number of sugar mills for a variety of reasons, including the unavailability of required water flows for this high-delta crop, lower per-acre yields, subsidy from taxpayer money to millers, inadequate sugar cane price for growers and higher retail sugar price for consumers.

With more sugar factories, sugar cane has made inroads into rich cotton zones like Ghotki in upper Sindh where its acreage grew from 16,089 acres in 2007 to 144,307 acres in 2017, mostly at the expense of cotton.

Cotton continues to face decline in production after having achieved impressive figures only a decade back. The government looks the other way and tends to support millers by pitching in frequent subsidies.

The sugar cane crop was cultivated on 1.4m hectares (around 3.5m acres) in 2018, consuming 24m acre-feet of water, or three times the capacity of Tarbela dam

Why such a large number of sugar mills look unviable is explained well by Pakistan Council of Research in Water Resources Chairman Mohammad Ashraf. He says the country’s sugar cane crop was cultivated on 1.4m hectares (around 3.5m acres) in 2018, consuming 24m acre-feet of water, or three times the capacity of Tarbela dam.

Sugar cane has been promoted in southern Punjab, which is a water-stressed region with saline groundwater reserves. “The use of such groundwater causes secondary salinisation in land,” he says.

“Since we don’t have a crop zoning system in Punjab or Sindh, we are losing precious fresh surface water resource to sugar cane and at the cost of cotton,” Mr Ashraf says. “We need to rationalise the sugar cane requirement, and the state should take a policy decision in this regard.”

Millers have their own axe to grind. The chairman of Pakistan Sugar Mills Association’s Sindh chapter, Dr Tara Chand, asserts that millers need more sugar cane to meet crushing capacity of mills. This could be done by varietal change through governmental research, he says.

The sugar cane acreage has remained unchanged for several years and only areas under sugar cane cultivation are changed, he says. “Amid a 15pc year-on-year drop in sugar cane output in the current season, a mill with a daily capacity of 12,000 tonnes is receiving 7,000 per tonne of sugar cane for crushing, forcing it to procure crop from other districts.”

Moreover, the sucrose recovery is down by half per cent this year, he adds. “I agree that we don’t need more mills and that’s why the sugar industry itself sought a moratorium on the establishment of new ones.”

Sindh Abadgar Board Vice President Mahmood Nawaz Shah holds millers responsible for an unusual growth of the sugar industry, and dismisses millers’ argument as illogical that they need inexpensive crop because sugar business is becoming unviable.

“We had been opposing the unnatural growth of sugar factories, as sugar cane was encroaching upon the cotton zones of Sindh. Situation is so bad for cotton that today we don’t even have a single high-yielding new seed for cotton,” he says.

He complains that while the sugar industry gets subsidy more often than not, growers get inadequate crop prices and consumers buy sweetener at higher retail rates.

Average per-acre sugar cane yields continue to vary between 600 and 700 maunds (1 maund equals around 37kg) against the potential of 1,800-2,300 maunds.

Researchers like Nihal Marri believe that millers press growers to sow specific varieties for want of more sucrose, regardless of the fact that such varieties are approved or unapproved.

Growers opt for millers’ varieties, as they have to sell their crop to them. “Timely sowing of crop and the use of inputs like diammonium phosphate and potassium are crucial to have increasing per-acre productivity. But growers end up having productivity figures of 600 maunds to 650 maunds per acre,” he says. Likewise, sucrose recovery remains between 8.5pc and 9.5pc.

Water availability is fast declining with each passing day whereas sugar cane needs 96 inch of water in its 14-month crop cycle from sowing to harvesting.

Being a lower riparian in the interprovincial water distribution system, Sindh is always at the receiving end. Timely availability of water eludes growers at crucial stages, especially in the Kharif season, which leads to lower productivity.

Reduced water flows are making it difficult for farmers to maintain sugar cane crop at a time when its harvesting coincides with other crops’ land management that require cash flows.

Besides cane’s by-products, the profitability for millers revolves around sucrose recovery. Annual average sucrose recovery is invariably 10.3pc to 10.4pc in Sindh over the past decade (2007-08 to 2017-18) against the provincial benchmark of 8.7pc. Sucrose recovery in excess of benchmark entitles growers to premium payment.

The percentage varied between 9.015pc and 9.83pc a decade earlier (1998-99 to 2008-09). Sindh still has a better recovery percentage when compared with Punjab.

The sugar cane acreage in Sindh has seen a marginal increase, rising from 279,473 hectares in 2018-19 to 286,000 hectares in 2019-20, mainly in Benazir­abad, Mirpurkhas, Tando Mohammad Khan, Thatta, Umerkot, etc.

Published in Dawn, The Business and Finance Weekly, January 20th, 2020