Daily The Business

Sugar millers threatens to quit season

Our Correspondent

LAHORE : As the government pressure mounts on sugar mills to start the new crushing season, there is an almost unanimous verdict from the sugar mills across Pakistan: they would rather not start the season than to sustain a Rs.15/Kg loss on production of sugar due to the mismatch in sugarcane price and the price for sugar. A daily loss of Rs. 6.0 Million to Rs. 25 Million depending on capacity of the mill with the larger one losing more money!
“The key question to ask is why would a business solely setup to crush sugarcane with approximately half a trillion rupees of investment (90 Mills with an average value of Rs. 6.0 Billion) with an off season of 7 months, not want to run this season?” said Mr. Aslam Faruque, Chairman Pakistan Sugar Mills Association.
He explained that the high minimum support price of Rs180/- set for sugarcane for the last 4 years has motivated the growers to plant more sugarcane which has caused Pakistan to produce bumper crops and as a consequence the nation has become a surplus producer severely depressing local  sugar prices. The PSMA has for the past couple of years had been repeatedly  asked the government to allow timely exports to reduce the surplus of sugar, stabilise the local market prices and also earn foreign exchange for the country, but governments have been consistently dragging their feet in allowing timely exports and thereby unduly depressing local prices of sugar to levels  which are now untenable.
However when fixing cane prices successive governments repeatedly overlook the policies they set on the final product, sugar.
Mr. Faruque pointed out that ever since the new Federal and Provincial governments have taken charge, PSMA has been making all out efforts to get their attention for a workable solution to the industry’s problems and to a resolution of the past dues of the industry a major one being a Rs. 14.0 Billion payable for mills which exported sugar and earned precious foreign exchange and also made payments of approximately Rs. 300
Billion in sugar cane liabilities paid to growers which was also validated by a suo Moto notice taken by the honourable Supreme Court.
Sadly, despite after many meetings, not a single issue has been resolved and no positive direction has been taken by either the Federal or Provincial governments.
“If timely decisions had been taken today the situation could have been more stable for mills to operate. Is it fair of the government to ask sugar mills to start crushing without paying any heed to structural issues of the industry and cash losses being inevitable?” said Mr. Faruque.
Every business has the fundamental right to make economic decisions about their viability and business operations however the situation in Pakistan is complicated as  the sugar industry is regulated. Each sugar mill is told when to run and has a cane price dictated to it and yet has no clarity about the price it will be able to charge for its final sugar product. Sugar mills are not given an upfront export permission to sell their excess sugar when they need to do so. As of today, Pakistan sits with a major surplus but exports are still not allowed due to harsh conditions set by the government.
PSMA would like to reiterate that should the government take coercive measures to get mills to start, inspite of the mills being unwilling to run till such time that a fair operating system is provided for the industry as a whole, then it must be noted that it remains the constitutional right of each sugar mill to decide whether to run because mills need to answer to their many shareholders. Mills run as businesses that are answerable to their large numbers of shareholders given that a number of sugar mills operate as publically listed companies.
The PSMA again requests the federal and provincial government solve the issues at hand for the prosperity of the farmer, the miller and the agrarian economy of the country.

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