AT a meeting held on September 29 to fix the price of sugarcane for the 2015-16 season between Sindh government officials, sugar millers and growers, the millers insisted that they be given a cash subsidy and the price be fixed at last year’s level of Rs172 per 40kg.

Their proposal was in sharp contrast to the growers’ demand for Rs230.

The meeting, chaired by the provincial agriculture minister, was adjourned for 20 days, after which the Sindh government would either call another meeting or fix the rate for sugarcane and the date for the beginning of the cane-crushing season.

Under existing law, the crushing season is to start from October 1, but Chief Minister Qaim Ali Shah has set the deadline for October 10.

A participant at the meeting believes that the millers seem to be in no mood to offer anything over Rs160 per 40kg, while simultaneously seeking a subsidy of Rs12 per 40kg to pay last year’s price of Rs172 per 40kg.

The Sindh Abadgar Board (SAB) and the Sindh Chamber of Agriculture (SCA), which represent the growers, argue that the rate of Rs230 per 40kg is justified for this year’s crop considering their cost of production. They are ready to have a third party assess their cost of production.

According to a Sindh government official, the Agriculture Policy Institute’s help might be obtained in this regard. Sindh’s sugar mills crushed 17.25m tonnes of sugarcane in the 2014-15 season when the crop was grown on 316,750ha.

SCA General Secretary Nabi Bux Sathio asserts that considering the current price of sugar, the millers should share their ‘unjustified’ profit with the farmers and agree to their demand of Rs230 per 40kg

Quoting Pakistan Sugar Mills Association (PSMA) figures, SAB President Abdul Majeed Nizamani claimed that the average recovery of sugar in 2014-15 was 10.51pc against the province’s benchmark of 8.73pc.

“It is an impressive recovery which should not deter millers from giving a fair price to growers. Consider Punjab’s case, where there was no delay in the commencement of the sugarcane-crushing season last year and no controversy over its price. And Punjab’s sugar recovery benchmark was 7.5pc, considerably lower than Sindh’s.”

The Sindh government paid a subsidy of Rs3.89bn to 28 sugar mills at a rate of Rs12 per maund last year. This subsidy was meant for those mills which had paid farmers a price of Rs160 per 40kg. But five sugar mills of Sukkur and Ghotki, which had paid a rate of Rs182 that was originally fixed by the provincial government, were excluded from the subsidy.

Now these five mills — which had collectively crushed 107.719m maunds of sugarcane last year — have moved the Sindh High Court to seek the same Rs12 per maund subsidy, according to Sindh cane commissioner Agha Zaheer. A subsidy of around Rs1.29bn will have to be paid to them if they win the case, which will take the overall amount of subsidy for millers to Rs5bn.

Sugarcane producers say average per-acre production is around 500 or so maunds in the province. But even farmers who are getting much better yields (because of their use of costly inputs) are not able to meet their cost of production, which is around Rs145,000 per acre.

Nizamani estimates that the millers pocketed an amount of Rs9.487bn last year by refusing to pay the originally announced price of Rs182 per 40kg.

Historically, the price of sugarcane has been slightly higher in Sindh as compared to Punjab, mainly owing to the better recovery of sugar in the province. Thus, Punjab had fixed the crop’s price at Rs180 per 40kg last year, while the Sindh government had originally set it at Rs182. But it later revised it down to Rs155 after coming under pressure from sugar millers.

This had led to an outcry by sugarcane producers, and the chief minister had to restore the price back to Rs182 — which remained ineffective. The millers moved the Sindh High Court and lost their case and now their appeal is pending in the apex court.

SCA General Secretary Nabi Bux Sathio asserts that considering the current price of sugar, the millers should share their ‘unjustified’ profit with the farmers and agree to their demand of Rs230 per 40kg.

Published in Dawn, Business & Finance weekly, October 5th , 2015

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