Inquiry holds millers responsible for unnatural surge in sugar prices
Action against sugar mafia urged
KARACHI:
The sugar mafia is so strong that it is now challenging the government’s writ. The government has conducted a thorough investigation into the unnatural increase in the sweetener’s prices and its findings have held millers responsible.
Stakeholders have demanded that the government launch a crackdown on the mafia as sugar prices have not dropped but are consistently increasing despite room for a significant reduction.
Pakistan Bureau of Statistics (PBS) reported that sugar prices rose 0.09% on a week-on-week basis and 19.57% year-on-year to a nationwide average of Rs81.40 per kg in the week ended May 28.
Retail outlets were selling the commodity in the range of Rs79.50-87.50 per kg across the country in April, according to the bureau.
“The investigation has shown the characters behind the scandal, who are the sugar mill owners. Now, the government should take action against them to bring the commodity’s prices down to fair levels,” Pakistan’s largest wholesale market Jodia Bazaar’s sugar dealer Shahid Nadeem said while talking to The Express Tribune.
“Policymakers (parliamentarians) are in the business. They own sugar mills. They have maintained their monopoly. They operate through a cartel. They don’t let small players enter the business that can allow competition in the sugar industry,” said Sindh Abadgar Board Vice President Syed Mahmood Nawaz Shah said.
The investigation report suggests that mill owners have got a profit of around Rs100 billion from the end-consumers.
Nadeem said there was ample room for a reduction in sugar prices. “The retail price can easily be brought down to Rs60 per kg.”
The millers reported that they bought sugarcane at Rs200 per 40 kg in the current season. The recovery of sugar from sugarcane was calculated at around 10%, meaning 4 kg of sugar is produced from 40 kg of sugarcane.
“Accordingly, the cost of production is around Rs50 per kg. One may add other expenses of Rs4 per kg in mills and another Rs4-6 on account of wholesaler and retailer commissions and the cost of transportation to retail outlets,” he said.
However, the mill owners do not mention earnings from bagasse, molasses and press mud. They use bagasse as fuel to run their boilers for sugar manufacturing. Simultaneously, it is used to produce electricity.
The National Electric Power Regulatory Authority (Nepra) has awarded them a power tariff for electricity sale to the government.
Secondly, the millers produce ethanol from molasses and earn handsomely through the export of both these items.
Molasses content is calculated at 3-5% after extraction, Shah said. Thirdly, they sell press mud, which is used in manufacturing fertiliser. “They sell each and everything, even waste, but avoid paying to sugarcane growers.”
The mill owners never talk about the income earned from sugarcane waste when they talk about sugar prices. They insist that sugar prices are high because they buy sugarcane at a high price, which is incorrect.
Sadly, the growers have always been exploited. They are forced to sell their produce at below-cost prices most of the time.
“Farmers have grown sugarcane over 12-14% less area this year compared to previous years after they could not get a fair price for their produce. This may have contributed to comparatively lower sugar production,” he said.
However, the sugar mills even did not reduce prices a couple of years ago when they were able to produce a record 7.2 million tons.
Sugar prices have reached Rs80-85 from Rs48 about five years ago while the millers have continued to buy sugarcane at Rs170-180 per 40 kg in the past four years.
They have given a slightly better price of Rs200-210 per 40 kg this year after sugarcane production came down 12-14% nationwide.
They increase sugar prices by up to Rs20 per kg but avoid paying additional Rs10-20 for 40 kg of sugarcane.
“We have won the sugar premium price case. The court has asked the millers to pay Rs64 billion to cane growers,” he said.
“We had been fighting the case since 1998 and won it in 2019. The premium of Rs64 billion is for 21 years (1998-2019) as it has kept growing every year,” he said.
He said the mill owners earned a hefty Rs6 billion by increasing the sugar price by every Re1 per kg. “One can calculate how much they would have earned by doubling the commodity’s price in the past five years.”
The probe into the sugar scandal found that mill owners exploited growers and they did not pay farmers a fair price for their produce. The millers made hefty profits by pocketing subsidy on exports through increase in prices in local markets and number juggling.
Published in The Express Tribune, June 2nd, 2020.
The sugar mafia is so strong that it is now challenging the government’s writ. The government has conducted a thorough investigation into the unnatural increase in the sweetener’s prices and its findings have held millers responsible.
Stakeholders have demanded that the government launch a crackdown on the mafia as sugar prices have not dropped but are consistently increasing despite room for a significant reduction.
Pakistan Bureau of Statistics (PBS) reported that sugar prices rose 0.09% on a week-on-week basis and 19.57% year-on-year to a nationwide average of Rs81.40 per kg in the week ended May 28.
Retail outlets were selling the commodity in the range of Rs79.50-87.50 per kg across the country in April, according to the bureau.
“The investigation has shown the characters behind the scandal, who are the sugar mill owners. Now, the government should take action against them to bring the commodity’s prices down to fair levels,” Pakistan’s largest wholesale market Jodia Bazaar’s sugar dealer Shahid Nadeem said while talking to The Express Tribune.
“Policymakers (parliamentarians) are in the business. They own sugar mills. They have maintained their monopoly. They operate through a cartel. They don’t let small players enter the business that can allow competition in the sugar industry,” said Sindh Abadgar Board Vice President Syed Mahmood Nawaz Shah said.
The investigation report suggests that mill owners have got a profit of around Rs100 billion from the end-consumers.
Nadeem said there was ample room for a reduction in sugar prices. “The retail price can easily be brought down to Rs60 per kg.”
The millers reported that they bought sugarcane at Rs200 per 40 kg in the current season. The recovery of sugar from sugarcane was calculated at around 10%, meaning 4 kg of sugar is produced from 40 kg of sugarcane.
“Accordingly, the cost of production is around Rs50 per kg. One may add other expenses of Rs4 per kg in mills and another Rs4-6 on account of wholesaler and retailer commissions and the cost of transportation to retail outlets,” he said.
However, the mill owners do not mention earnings from bagasse, molasses and press mud. They use bagasse as fuel to run their boilers for sugar manufacturing. Simultaneously, it is used to produce electricity.
The National Electric Power Regulatory Authority (Nepra) has awarded them a power tariff for electricity sale to the government.
Secondly, the millers produce ethanol from molasses and earn handsomely through the export of both these items.
Molasses content is calculated at 3-5% after extraction, Shah said. Thirdly, they sell press mud, which is used in manufacturing fertiliser. “They sell each and everything, even waste, but avoid paying to sugarcane growers.”
The mill owners never talk about the income earned from sugarcane waste when they talk about sugar prices. They insist that sugar prices are high because they buy sugarcane at a high price, which is incorrect.
Sadly, the growers have always been exploited. They are forced to sell their produce at below-cost prices most of the time.
“Farmers have grown sugarcane over 12-14% less area this year compared to previous years after they could not get a fair price for their produce. This may have contributed to comparatively lower sugar production,” he said.
However, the sugar mills even did not reduce prices a couple of years ago when they were able to produce a record 7.2 million tons.
Sugar prices have reached Rs80-85 from Rs48 about five years ago while the millers have continued to buy sugarcane at Rs170-180 per 40 kg in the past four years.
They have given a slightly better price of Rs200-210 per 40 kg this year after sugarcane production came down 12-14% nationwide.
They increase sugar prices by up to Rs20 per kg but avoid paying additional Rs10-20 for 40 kg of sugarcane.
“We have won the sugar premium price case. The court has asked the millers to pay Rs64 billion to cane growers,” he said.
“We had been fighting the case since 1998 and won it in 2019. The premium of Rs64 billion is for 21 years (1998-2019) as it has kept growing every year,” he said.
He said the mill owners earned a hefty Rs6 billion by increasing the sugar price by every Re1 per kg. “One can calculate how much they would have earned by doubling the commodity’s price in the past five years.”
The probe into the sugar scandal found that mill owners exploited growers and they did not pay farmers a fair price for their produce. The millers made hefty profits by pocketing subsidy on exports through increase in prices in local markets and number juggling.
Published in The Express Tribune, June 2nd, 2020.