Sugar industry deserves no sympathies

PSMA AppealAn advertisement has been published in local newspapers by Pakistan Sugar Mills Association (PSMA). It is aimed at extorting taxpayers’ money rather than making any effort to overcome their own inefficiencies, contain wastages and failure to undertake product diversification.

It seems that the advertisement has been released by PSMA-Punjab Zone. This faction of Association is seeking subsidy to compete in the global market. While the high cost of production is a serious issue, it just can’t be overcome without removing the root cause. One of the major factors responsible for higher cost of production is construction of sugar mills in Southern Punjab, the cotton growing belt.

This is the outcome of following bad policies that include: 1) most of these mills owned by politicians were established during the regimes of General Ziaul Haq, PML-N and PPP, as they were dished out permissions and loans as political bribe, 2) most of these mills have been establish in cotton growing belt and to ensure sugarcane availability farmers were lured to grow the crop by offering higher support price and 3) most of these mills were given huge loans to pass on the benefit to the local suppliers of sugar plants and machinery.

In all prudence these mills deserve no sympathies as owners themselves are also the suppliers of bulk of the sugarcane to these mills. These feudal lords never bothered to improve yield and recovery as they could always get an increase in sugarcane support price very conveniently due to enjoying access to power corridors.

Feudal lords deliberately keep sugarcane crop size low so that they could sell their produce above the support price fixed by the government. The yield and recovery in Punjab is far lower as compared to Sindh, only because weather and soil conditions are not suitable for the cultivation of sugarcane.

The mills owned by politicians delay payment to small sugarcane growers from one to two years and then try to create an impression that small growers are the victim of bad government policy, inability of mills to export surplus sugar. As such mills don’t face any cash flow problem because the entire stock is pledged with banks.

These mills make a lot of hue and cry about high inventory and inventory carrying cost but never declare the amount earned through export of molasses and also from sale of baggage. Cost audit can help in identifying such non-disclosures.

Almost all the mills have attached distilleries for the production of ethanol but prefer to export molasses rather than operating distilleries. It may be pertinent to say that sale of E-10 (petrol containing 10% ethanol) can help in bringing down petrol import. Vehicles also don’t need any additional gadgets (like a kit for using CNG/LPG) for using E-10.

The suggestion to ask Trading Corporation of Pakistan (TCP) to maintain buffer stock will not only add to the cost of sale but also open door for corruption.

The solution is simple; mills should declare their daily crushing capacity and government should also fix minimum duration of crushing season. Mills not operating for the specified duration must be penalized and those operating beyond this period be rewarded – no payment of GST on sugar produced during these extra days.

Like past practice, zones should be established and mills be made responsible for facilitating the growers to cultivate enough sugarcane to keep the mills running for the designated period.

It should be made mandatory for mills to establish power plants and run these on baggase. This can help in getting additional electricity at low cost.

Quantitative restrictions should be imposed on export of molasses. It should also be made mandatory to convert minimum 30% of molasses into ethanol.

Pakistan has to achieve food security that requires prudent use of cultivable land and limited available water. Ideally area for cultivation of water-intensive crops should be reduced and efforts should be made to improve production and productivity.

Part of this freed area should be used for the cultivation of maize, canola, sunflower, gram and pulses to reduce food import bill and also help the farmer in cultivating these crops of shorter duration (spread over 90 to 120 days).

The feudal lords and business tycoons have enjoyed their heyday and now the time has come to stop exploitation of small farmers.






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