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Cane growers at receiving end

October 14, 2012

Delay in announcement of sugarcane support price, which may ultimately postpone cane crushing for the time being, has left growers vulnerable to distortions of market mechanism—thanks to inaction of policymakers.

Under the rules of business, cane crushing is supposed to begin from mid-October in Sindh and from November in Punjab. The two provincial governments should have announced support prices by now. But that has not happened and some meetings of stakeholders held in the two provinces in September and in this month have so far remained inconclusive.

Currently, support price in Sindh is Rs152 per maund and Rs150 for Punjab. Growers want these prices to be raised to Rs180 and Rs175 per maund respectively. Other stakeholders, primarily sugar millers do not agree. But instead of sorting out the issue, the provincial authorities seem to be suffering from inaction.

Cane growers fear that delayed cane crushing would leave them at the mercy of millers and increase sucrose content in sugarcane. So, if the support price is announced at a time when growers would have no option but to accept that, millers would make extra money by extracting more sugar from canes and selling it at a higher price after exhausting the current sugar stocks.

Ibrahim Mughal, Chairman of Pakistan Agri Forum insists that governmental inaction is intended to benefit sugar millers.

But millers have a different story to tell. “We are sitting on sugar stocks of no less than 1.8 million tonnes. The government has just allowed export of an additional 0.2 million tonnes.

Had the government allowed sugar exports of say, half a million tonnes or more, two to three months ago, we wouldn’t have been facing the glut. Frankly speaking I can’t begin cane crushing unless I clear my own stocks of the commodity produced last year,” said owner of a Sindh-based mill.

Independent analysts offer a much-lower estimate of sugar stocks—of 1.3 million tonnes at best. Even if 0.2 million tonnes is exported out of this stock right now, we’ll be left with 1.1 million tonnes and that quantity would suffice the nation’s need for more than three months, as domestic consumption of the sweetener ranges between 300,000-350,000 tonnes per month.

Sugarcane production this year is estimated to reach 60 million tonnes and sugar output is estimated at around five million tonnes, against last year’s 4.7 million tonnes. “Sucrose content in cane of Sindh has always been higher than that in Punjab but this year we’re expecting further increase (in sucrose content) in our crop because of delayed rains that hit growing areas when the crop had matured,” said a progressive sugarcane farmer in district Benazirabad.

“If the crop harvesting doesn’t start from the middle of this month, canes would gain more of sucrose content. But on the other hand, delayed harvesting will affect our finances. Most growers are indebted of banks and informal lenders and they have to clear their debts. Delay will only push up our cost of borrowing.

Besides, rice harvesting has begun in Badin district and will soon start across the province. A delayed cane harvesting simply means we’ll have to hire working hands at a higher cost. And by the time transporters will also demand higher fare to take truckloads of cane to sugar mills because they will be engaged in paddy transportation from farms to rice mills.”

During the past few years, the government has increased support prices of food crops including wheat and cane. The move has led to a general increase in income levels in rural areas. But small farmers feel left out. They say that whenever the support price has been hiked the move has been made quite late delaying the harvesting of a particular crop. Since small farmers cannot afford additional cost of delays in harvesting or storage or transportation of a crop from fields to mills they always get minimum benefit from hiking of support price.

Official of Sindh Agricultural Department admit privately that fixing sugarcane support price is not a problem in their province.

“Since sugarcane produced in Sindh normally has higher sucrose content we keep our support price a bit higher than that of Punjab. So, you can say all eyes are fixed on price fixation in Punjab,” one of the officials told Dawn.

In Punjab the indecision is rooted in, what an insider calls, ‘submissive bureaucracy’. “Once the meeting called for fixing sugarcane support price was postponed because the CM was not in the country. And the second time, the meeting remained inconclusive because of intervention from the federal government,” according to sources privy to these meetings held in September.

These sources say that whereas the Punjab Agricultural Department had worked out the minimum per maund (40kg) price of sugarcane at Rs168, federally administered Agricultural Policy Institute had come up with a different calculation which put it at Rs164 per maund. Now, unless this issue is sorted out, price fixation cannot take place.

Technically, Punjab’s provincial government can go ahead for further discussions with stakeholders with its own working of Rs168 per 40kg price of sugarcane. It is not bound legally to follow the API. But growers complain that excuses are being invented to delay cane crushing to benefit sugar mills whose owners include top politicians at both provincial and federal levels.

If indecision of provincial governments in fixing cane support price lingers on further and sugar mills start cane crushing one or two months behind schedule, late arrival of fresh supplies may lead to rise in sugar prices and hit the common man hard.

Sugar mills take at least one month in releasing fresh stocks of sugar after initiating cane crushing. So, behind-the-schedule cane crushing after nearly exhausting the current stocks may lead to hoarding of fresh supplies, as we’ve seen in the past. At the end of the day, consumers would suffer.