Sugar millers stop buying from farmers, close mills

Move comes after increase in sugarcane prices; cabinet members concerned

ISLAMABAD: The influential sugar millers have joined hands and closed their production units in an apparent attempt to push down prices of sugarcane, which have gone above the support price.

Some members of the cabinet, in a recent meeting chaired by Prime Minister Imran Khan, raised the issue and voiced concern over the suspension of sugarcane purchase by the sugar mills, causing difficulties for the farmers.

It was pointed out in the meeting that most members of the Pakistan Sugar Mills Association had colluded in order to close their mills as the sugarcane purchase price jumped to Rs225 per 40 kg compared to the official support price of Rs190 per 40 kg.

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Cabinet members were of the view that continued exploitation of the farmers by the powerful sugar mill owners was due to the pricing policy for sugarcane compared to the cotton crop, which did not have a support price. As a result, there was a constant increase in the cultivation of water-intensive sugarcane crop in the cotton-growing areas.

The problems of farmers switching from cotton to sugarcane plantation had been compounded by the customs duty structure, which provided substantive protection to the sugar producers against imports whereas a marginal import duty on cotton affected cotton prices in the country in the face of cheaper imports.

Unsatisfactory quality of seeds and pesticides was also one of the reasons, the cabinet members stressed.

The cabinet agreed that the decline in cotton production needed to be deliberated upon including the contributing factors such as substandard seeds and pesticides, delay in implementing the Plant Breeders Rights Act, seeking Chinese cooperation and crop-zoning.

However, officials of the food ministry said the government was reportedly responsible for the exploitation of farmers as the powerful lobbies were influencing the policy decisions.

They pointed to the sugar and textile millers as the two powerful lobbies that were exploiting the farmers. They were of the view that the recent abolition of all duties by the government on cotton import would hurt the farmers.

Cotton growers were holding back their harvest as they were left at the mercy of middlemen, who were not ready to buy the crop at attractive prices. Owing to the low return, the farmers had switched over to sugarcane but they were again being exploited - this time by the sugar millers.

Earlier, the Pakistan Tehreek-e-Insaf (PTI) government had taken notice of cartel formation in the sugar and wheat flour industries and decided to chalk out an action plan to tackle collusive market practices.

The move was prompted by findings of the Competition Commission of Pakistan (CCP) that showed that sugar and wheat flour millers had formed cartels for dictating their terms to the market.

Sugar and wheat flour millers had sharply increased prices in a bid to extract additional billions of rupees from consumers. Following the price hike, the government sent their cases to the CCP for investigation.

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The CCP found that they had formed cartels and increased product prices to exploit the consumers.

A cabinet member in an earlier meeting pointed out that the CCP had probed certain sectors of the economy and concluded that wheat flour and sugar prices were being manipulated through collusive practices.

"It is not clear whether the government has taken any action to address the issue," he said.

Some other members of the cabinet voiced concern over the failure of provincial governments to announce the sugarcane support price despite the arrival of crushing season.

When contacted, Pakistan Sugar Mills Association Vice Chairman Sikandar Khan categorically denied the existence of any cartel in the sugar industry and held the middlemen responsible for the crisis.

"Middlemen were selling sugarcane to the mills at higher prices of Rs250 per 40 kg," he said. "How sugar mills can operate at such higher rates when the ex-factory sugar price stands at Rs80 per kg," he asked and suggested that sugarcane prices should be linked with the recovery of sugar from sugarcane.

He was of the view that the government should fix ex-factory prices of sugar. 

Published in The Express Tribune, January 10^th, 2020.

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