Sugar price: Bitter fight over a sweetener

Impasse between millers, farmers continues .

KARACHI:

Sugar mills in Sindh are not motivated enough to start crushing the crop, stating that they cannot operate when the factory-gate price of the processed sweetener is less than the official sugarcane rate.

Deadlock over price between millers and farmers has now threatened to cast a shadow on other cash crops including wheat as sugarcane stocks pile outside factories and farmers await payment.

After going back and forth for a couple of weeks, the Sindh government has fixed the price of sugarcane at Rs182 per 40kilogrammes (kg) – the support price at which the factories are supposed to buy raw material from farmers under the Sugarcane Control Act.



Yousuf Dewan, CEO of Dewan Sugar Mills, says that at official rates the cost of sugar comes to around Rs54-55 per kg. “And the mills get Rs48-Rs48.5 at their gates. How can I run the business like this?”

The sugarcane crushing season in Sindh, which started with a delay of over a month on December 10, has moved at a slow pace. Only 10% of the crop has been converted to sugar by January 5, 2015, against the usual conversion of 50% in as many days, growers say.

A global slump in commodity prices has led to similar problems in sugar-producing countries like India where in some states millers have expressed the same concerns over the officially fixed rate of sugarcane.

Mill owners in Sindh have been criticised for their inflexible attitude especially when their counterparts in Punjab and Khyber-Pakhtunkawa have accepted Rs180 per 40kg as the official sugarcane price.

But Dewan said that is true for only parts of Punjab. “Only the millers who have their own cultivation of over 35,000–40,000 acres are able to function with that official rate. The rest of us are doomed.”

The other side

Farmers do not buy this argument and say that when it comes to input cost they have borne spiralling prices of fertiliser, pesticides, seeds and fuel.

Sindh Abadgar Board Secretary General Mahmood Nawaz Shah says that while millers complain about low ex-mill price, they don’t talk about their profit from sale of molasses, ethanol and benefit of in-house consumption of bagasse.

“They want farmers to keep on waiting, get frustrated and eventually submit to their demand,” he said.

“Even when sugarcane was selling at Rs155, none of us stopped supply. But millers, on the other hand, want to crush us by shutting down the plants.”

The prevailing sugar price should not be yardstick to determine profitability since crushing ends in four months but sugar is traded throughout the year. “Who knows how much the sugar price will rise in a few months.”

Millers are also being given a 10% subsidy on export and 20% of the surplus production is expected to be exported, he said.  In 2013-14, Pakistan produced 67.46 million tons of sugarcane with Sindh contributing 25%. There are 28 mills in Sindh.

The country is one of the largest producers of the crop but it has lacked in terms of yield per hectare.

Pakistan Sugar Mills Association Chairman Iskander M Khan says that government should give direct subsidy to farmers if it was so concerned about their fate.

“Fact remains that sugarcane price constitutes 85.5% of our total production cost. And we can’t accept the high rates being offered to us.”

Published in The Express Tribune, January 6^th,  2015.

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