Sugar Cane Crisis

March 29, 2018 Management

Sugarcane is the second largest non-food crop after cotton and ranks fifth in respect of acreage. Prolonged drought and heat stress decreased its production by 22 per cent in 1999-2000, and further 17 per cent in 2000-01. Of late, there has been confrontation between growers and millers over price. Growers demand higher price for their raw material and millers complain about increase in production cost and imports.

A study it revealed that more than 65 per cent farmers have decreased the total area under cane production due to water shortage, behaviour of the mills’ management, late payments, increased input cost, and diseases and rodent attack. Constraints faced by the growers are underweighting of cane at purchase centres and mill gates, undue deductions by mills up to 10 per cent, delays in payments, middleman, obtaining an indent, and the payment of premium. The price structure is such that out of the sale price some 35 per cent of the cost goes to farmer and 24 per cent to the government in taxes etc. 21 per cent to mills with nine and six per cent to wholesalers and retailers respectively. The country exports sugar at low price and imports the same at high rates. Transporters, particularly trolley-owners also exploit mill owners by demanding additional Rs250–300 per trolley during cane shortage, while a delay in unloading at the gate incurs an additional Rs100 per day for trolley along with the provision of food and tea for trolley drivers etc by the mills. The government intervenes by issuing export permits to mills, importing sugar on public account and controlling retail distribution below the market price through utility stores

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Consumption relationship indicates the price elasticity for refined sugar as four and income elasticity as eight in nominal terms. This implies that relatively small change in cane supply causes more proportional increase in sugar price. These factors create shortage thus increasing the price of the commodity. These factors are manoeuvred towards a specific end by a plan jointly managed by the elements that should have been working to control the price escalation and meet the shortage. The latest move to resolve the crises is a strange one.

Supply to the Utility Stores has been doubled with a view to providing relief to public. The Utility Stores are selling one kg of sugar for Rs27, while in the market it is available at Rs37-38. A price difference of Rs15 is unheard of and, to the say least, is not natural. The shortfall of up to one million tons could be eased if the buffer stock available with the Trading Corporation of Pakistan (TCP) is utilised. The stock has cost the TCP Rs18 per kg. Policymakers have failed to realise the gravity of the situation.

Instead of checking the price hike, a free hand has been given to hoarders and profiteers, operators of the utilities stores for forcing consumers to buy other items if they sought sugar at controlled price Sugar crisis persisted despite the fact that some two million tons was produced and a huge quantity imported. The country’s requirement is four million tons a year as against the supply of six million tons produced by more than 70 sugar mills. There is need for seed treatment in sugarcane cultivation.

Agencies such as research and extension department should be directed to enhance the knowledge of growers through demonstration. Sugar mills should be bound to arrange and distribute seeds of high yielding varieties on easy terms to enhance production and to reduce poverty. Awareness among farmers on the balanced use of fertilizer be enhanced and the government should take necessary steps to increase its supply at reasonable rates and at proper time. Demonstration plots should be organised by the Extension Wing of Agriculture Department at least on village level to disseminate information among the arming community in an effective manner. While the sugar industry was perturbed due to increase in sugarcane price and increase in Sales Tax which has been enhanced from 3. 50 per cent to 4 per cent. Consequently, the increase in sugarcane price and sales tax altogether have enhanced the cost of production while the import of Indian sugar at dumping prices are posing a serious threat to the survival of the local industry. It is however unfortunate due to this mismanagement in sugar industry the sufferers would be consumers who have to buy the essential item at a much higher rate.

It may be recalled that before start of the crisis, sugar was being sold at a price of Rs18 per kg which shot up to the level of Rs30 per kg before the month of Ramazan. Although the current prices at retail stage is Rs24-25 per kg it is still much higher when compared with the price of Rs12-13 being sold in neighbouring India? In the best interest of the people, the economic managers in Pakistan specially those looking after the agriculture sector would have to evolve a policy to keep price in line with the buying power of the people at the grass root level.

The local industry has strongly urged the government that in order to enable it to meet the threat from imported sugar the duty on import should again be increased from 15 per cent to 40 per cent so that the local industry could be saved from crippling effects due to dumping prices offered by the Indian exporters. The local industry rightly expected of the government to provide level ground to the national sugar industry against dumping sugar imports taking place at present. The landed cost of the imported sugar from India, is around Rs22-23 per kg which is much cheaper when compared to the price of local sugar of Rs24.

While the sugar industry has the concerns that under such a situation how it would survive on one hand, the consumers on the other hand have their own grievances. They generally feel how Indian sugar Industry managing to sell the sugar at Rs13-14 per kg to their consumers. Naturally they have the feelings that what is the sauce for the goose should also be the sauce for the ganders. The sugar industry also pleads that in order to restrict import of sugar from India it can be placed on the negative list.

It is a matter of great concerns that despite having a strong industrial and agriculture base, the sugar industry is forced to operate below 70 per cent of its capacity mainly because of all these problems. The available capacity to produce an export surplus is difficult to be utilized. While the government is determined to tap all available resources, the potential of sugar industry is going waste. The situation offers the challenge to our economic managers for some brain storming to make out some ways to get benefits of available resources in sugar industry at the optimum level.

Responsibility lies on the shoulders of the economic managers to evolve a mechanism in such a manner that enables the local industry to survive while the price of this essential item remains within the reach of the consumers. One way to get out of this perplex situation is to sacrifice on the part of the government either in the shape of withdrawal of sales tax or to give subsidy to this sector as is being practiced in India, said some experts in the sugar industry Hoarders and profiteers, almost all of them Muslims, have once again created a fake shortage of sugar from the market just before the start of month of fasting: Ramadan.

Though Ramadan is still ten days away, and the T. V is blaring away the celebrations of 14th August, the people of Pakistan don’t have power, gas, sugar, water, jobs, money, food, security and hope, and yet they are talking about celebrations. Chief Justice Lahore High Court Justice Khawaja Muhammad Sharif took suo moto notice of sugar crisis in Punjab. So what? It is heard that the chief minister of Punjab is very disciplined but we all know that most of the sugar mills in Punjab and Sindh belong to the members of parliament.

All these hoarders and criminals are sitting in the assemblies, so how could one expect that elected parliament would come to the rescue? The Federal Board of Revenue (FBR) has decided to impose 16% General Sales Tax(GST) on ex mill rate of suga. FBR’s notifications will do little to finish off this crisis. There is no grip or control of the government to stop these hoarders from doing their evil works. Only stern justice, speedy punishment, ruthless accountability, public hangings with closures of mills will do the works


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