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Sugarcoated bitter facts

Comes Ramzan, sugar prices skyrocket mocking the government’s claim the commodity is being sold at Rs60 a kg in the open market

Sugarcoated bitter facts

Sugarcane is one of the most important cash crops of Pakistan; it is a key input for sugar production and forms essential item for other industries like chipboard, paper, barrages, confectionery, chemicals, plastics, paints, synthetics, fiber, insecticides and detergents. Pakistan is the 6th largest sugarcane producer, 9th largest sugar producer and 8th largest sugar-consuming country in the world. However, sugarcane producers and buyers of sugar are always unhappy because of the sugar mill owners’ methods of purchasing sugarcane and payments to growers and sugar prices respectively.

Over the years, domestic sugar consumption has grown from 0.5 million (m) metric tonne (MeT) in 1975 to 5.1m MeT in 2017 due to population growth. Per capita consumption of refined sugar in Pakistan was estimated at 25.7kg in FY17 (fiscal year). Processed food sector, which includes candy, ice cream and soft drink manufactures, accounts for almost 60 percent of total domestic sugar consumption. Furthermore, absence of major substitutes for sugar makes its demand inelastic.

A total of 89 sugar mills are presently operating in the country and are pre-dominantly owned by the private sector. Out of 89 sugar mills, 45 are located in Punjab, 38 in Sindh and remaining mills are located in KP. About 40 percent (36 sugar mills) in Pakistan are listed on Pakistan Stock Exchange (PSX).

According to Food and Agriculture Organization of the United Nations, sugarcane occupies nearly 1.7 million hectares of the cultivated land out of the available 22.0 million hectares. Its share in value added agriculture and GDP are 3.4 percent and 0.7 percent, respectively. The annual sugarcane production fluctuates between 45 million and 65 million tonnes depending on irrigation water supplies and rains.

The government actively controls the support prices of sugarcane, the retail average price per 40 kg stands at Rs180.6 (FY17: Rs180.6) in FY18 and FY19. Over the past four years, sugarcane prices have remained stable and increased slightly by Cumulative Average Growth Rate (CAGR) of 1.4 percent whereas, according to Pakistan Bureau of Statistics retail price of sugar in the month of April 2019 is Rs70.39 with 7.33 percent increase in one month which was Rs64.86 in March. The statistic shows continuous rise in sugar prices since January 2019.

Spokesperson for All Pakistan Sugar Mills Owners Association Chaudhry Waheed is not happy with the Pakistan Bureau of Statistics data; according to him price is no more than Rs65. “It’s true that price is increased but the cause must not be ignored; mill owners purchased sugarcane at the price of Rs210 to 230 this year, therefore the price will be set on the basis of production cost.”

In Ramzan, sugar price per kg is fluctuating between Rs70 to 80 depending upon the market. The Punjab government has issued a notice stating that the retail price of sugar cannot be more than Rs60 per kg.

Chaudhry Waheed rejects the government’s step to set the price at Rs60 and calls it a policy that will increase the price because no mill owner can afford to sell its product at such a miserable price. “The government has sealed five sugar mills in Faisalabad on the issue of sugar price; some mills are fined and some are threatened to be sealed. Such policies will create panic amongst mill owners and undoubtedly the supply of sugar would be halted; encouraging the black market.”

One of the high officials in the Punjab government tells TNS on condition of anonymity that sugar price hike is artificial because mill owners are not supplying sugar according to demand which is obviously facilitating them to create shortage in the market and increase prices ultimately. “On papers sugar mill owners are supplying sugar in the market but it is unavailable on ground that means the whole process from supplying to receiving is just paper transaction and a fraud.”

Waheed denies such allegations while putting all blames on the government and bureaucracy. “Bureaucracy is absolute corrupt and the government mismanages the issue on the misguidance of bureaucracy.”

Advisor to Chief Minister Punjab, Muhammad Akram Chaudhry, tells TNS the government is committed to keep the sugar price at Rs60 per kg come what may. “The government has started taking action against the mills indulging in price hike and creating artificial shortage in the market.”

On the other hand, mill owners have reportedly got permission from the federal government to export 1.1 million metric tonne sugar. Member Agri Forum Punjab and Director Farmers Association Pakistan, Farooq Bajwa, claims the federal government has approved Rs10 billion subsidy for the mill owners. Conversely, Chaudhry Waheed accepts that without subsidy sugar cannot be sold in the international market.

On the other hand, the industry is currently protected by a 40 percent import tariff designed to boost domestic sugar sector and protect the local industry from imports. The government intervenes in imposing trade controls over import and export of sugar by buying and selling sugar. Moreover, in order to support the export market of sugar, the government extends the export rebates to the mill owners every year.

“All the policies are to facilitate the mills mafia. Three families are sucking the blood of poor cane growers. I am certain in saying that most of the current Rs10 billion subsidy would go in the pockets of this cartel,” Bajwa states. “Instead of protecting the sugar mafia, the government must allow people to import sugar that can abolish the sugar mills’ monopoly. Nonetheless, we surely understand that it would not happen.”

According to Chaudhry Waheed the number of cane growers is increasing because of their trust in sugar mills. Moreover, mills have paid more to purchase sugarcane than the government’s set price just to encourage cane growers.

Farooq Bajwa has a different perspective on sugarcane price. According to him there are two aspects behind this statement of paying more to growers; first is that mill owners accept 44 or 45kg per mann (40 kg) against the support price the government announces every year, secondly mill owners add all charges in per mann support price to present the case that they have paid more to growers – merely a deception.”

He adds, “Mill owners have purchased sugarcane at the price of Rs75 to 90 per mann in the last two years and almost Rs14 billions of farmers are still to be paid. Because of mill owners’ worst attitude many farmers did not grow sugarcane. In fact, annual sugarcane production is reduced from 1.7 million acres to 0.9 million acres this year.”

The standing committee of Punjab Cabinet on Legislative Business, chaired by Provincial Minister for Law, Parliamentary Affairs and Local Government Raja Basharat, has empowered the Cane Commissioners and Deputy Commissioners across the province to ensure recovery of arrears of the growers from sugar mills owners.

Muhammad Akram Chaudhry states that Cane Commissioners have been advised to take serious actions against those mill owners who have not cleared the arrears yet. He asserts the Punjab government is committed to not surrender on the price hike and will take all measures to retain per kg price at Rs60.

Shehryar Warraich

The author is a member of the staff and can be reached at [email protected]

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