PESHAWAR, Nov 20: The sugar industry in the NWFP is likely to commence crushing operations in January — that is, with a delay of almost two months — because of financial constraints and availability of unsold stock worth more than Rs3 billion.

Owners of the sugar mills say low quality of cane produced in the NWFP and its high support price are the reasons for their inability to compete with the units in Punjab and Sindh, taking the whole industry to the verge of collapse.

Iskander Khan, chairman of the Pakistan Sugar Mills Association’s NWFP chapter, told Dawn that the sugar industry of the country, particularly that of the Frontier, was facing one of the worst crises which would delay the crushing season from November to January.

He said the support price for sugarcane in the Frontier province for the crushing season 2006-07 had been fixed at Rs65 per 40kg in line with the prices announced by the Punjab and Sindh governments despite the fact its quality did not match the cane produced in these two provinces.

According to him, sugarcane price in Punjab was Rs65 per 40kg and it carried the average sucrose content of 8.50 per cent, whereas in Sindh its price was Rs67 with average sucrose content of 9.50 per cent. He said average sucrose content of cane produced in the NWFP was not more than 8 per cent, which meant that the production of fine sugar would be in lesser quantities than those produced in Punjab and Sindh.

He said the sugar mills in the Frontier were bearing massive losses as the government was supposed to maintain ex-factory price at Rs31 per kg (inclusive of taxes), whereas at present it actually was not more than Rs27. This meant that the price did not even cover the cost of cane and the sales tax, which was paid by taking huge working capital finances from the banks.

Mr Khan said last year the country had a deficit of 40,000 tons, whereas the government allowed imports of more than 1.6 million tons that destabilised the local industry. Also, the government spent Rs16 billion on subsidies to dispose of surplus sugar.

He said mills in the NWFP still held around 90,000 tons of unsold stock, making a working capital of Rs3 billion dead, adding some of the mills might not be in a position to commence crushing even in January because of the non-availability of working capital.

He said the NWFP government had been contacted and told that the support price of Rs65 per 40kg, announced on Nov 6, was unsuitable. It had been made clear that many companies could not commence crushing operations in the existing scenario.