KARACHI, Dec 19: The Pakistan Sugar Mills Association (PSMA), Sindh Zone, on Monday defended the decision of stopping sugarcane crushing activities in Sindh to protest against raise in the price of sugarcane.

A PSMA press release issued here said that sugar mills of Sindh had decided to stop sugarcane crushing from December 18, 2005 due to ‘unbearable’ economic burden placed by ‘unprecedented revision’ made by the Sindh government to raise minimum sugarcane price to Rs60 per 40 kg on December 16, 2005 from Rs48 per 40 kg, notified earlier in October 22, 2005.

The PSMA said that the increase in minimum price by Rs12, that was 25 per cent, had rendered operation of Sindh sugar mills run into huge losses, which were not affordable. “It is against business norms and fundamental rights of pursuing profitable economic activities”.

The minimum sugarcane price is being announced by the provincial governments, it said adding that this price needed to be identical, as was the case of sugar price, which was left to be determined by free market. “The system of support price for sugarcane and no such cover for sugar has been creating economic distortions, grinding the sugar industry, particularly of Sindh.”

The press release said that minimum sugarcane price for 2005-06 crushing season had been notified by the government of Punjab at Rs45 per 40 kg, by NWFP Rs48, but the Sindh government revised it arbitrarily and in isolation to Rs60 from Rs48 per 40 kg. “This has pushed Sindh sugar industry in deep distress. Minimum sugarcane price at Rs48 was seven per cent higher than the previous season’s minimum price at Rs43 per 40 kg, insulating farmers from impact of inflation. No such cover has been evolved for sugar price.”

The PSMA said that minimum price contained cost of production plus reasonable profit, which secured economic return to the farmers and anything above it, would be left to market forces and not by “official coercive enforcement”.

The sugar industry of the province was not in a position to absorb such an uneconomic burden and bear its resultant brunt, the PSMA said, adding that financial position the sugar industry had been badly shaken by similar pursuits of the past several years. “Sugarcane support price, to recall, was introduced in 1980-81, with price differential between Punjab and Sindh at paisa 15 per 40 kg. This was raised to paisa 25 in 1988-89, to rupee one in 1997-98 and to Rs3 from 2001-02.”

Besides, quality premium on incremental sugar recovery in Punjab was not being notified and not being paid since 1995, it said.

The PSMA said that financial base of Sindh sugar mills had been eroded by adverse working results for the past several years at a stretch. “As at September 30, 2004 equity of 16 quoted sugar mills of Sindh was eroded to Rs702 million from aggregate paid-up capital of Rs2,377 million, due to losses accumulated being Rs1,675m. Other 11 operating sugar mills had been in worse financial shape than these mills. The preceding 2004-05 season was the worst as in it heavy losses had been suffered which further weakened financial structure.”

The PSMA-Sindh Zone urged the federal and Sindh governments to reassess the situation emerged, the worst for sugar industry of Sindh and take the first remedial measure of withdrawing the notification raising minimum sugarcane price to Rs60 per 40 kg in Sindh and evolve meaningful measures for revival and survival of Sindh sugar industry, presently in peril.—PPI