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Sugar industry position clarified




  • Any one aware of ground realities governing Pakistan’s sugar industry, at least for the latest past four years at a stretch, will find the contents simply paradoxical, discounting readers’ right to get facts, instead of writer’s prejudices.
    The Pakistan Sugar Mills Association has, time and again, categorically stated the problems faced by the sugar industry and details of parleys held at least four ministerial level meetings, appearing in media, bear testimony to truth. Write-up under reference, being inspired by ignorance, compels the PSMA to come out once more with facts to keep the record straight.
    This note is set in order of providing information on the latest current season and extend in reverse order to the preceding three years so as to provide proper insight and in sound sequence.
    During the latest 2003-04 (2002-03) season, national sugar industry rolled out a record sugar output at 3.997 (3.662) million tons, up 9.14 per cent, by higher efficiency as can be seen from processing of 43.468 (41.911) million tons of sugarcane, up 3.71 per cent and achieving an average sugar recovery improved to 9.19 (8.74) per cent.
    Negating such a fine performance can be sheer ignorance or mere negligence or poor aptitude or in the worst form getting carried by prejudices and bias. The PSMA has been releasing since several years past its two statistical statements regularly each fortnight, one relating to sugarcane crushing, production and recovery and second on lifting and stocks held at a given point of time.
    As of June 15, 2004, sugar lifting was 2.140 (2.006) million tons, leaving stocks at 1.876 (1.677) million tons. These figures have invariably been authentic and transparent.
    The writer of the article has expressed his unhappiness on procurement of 500,000 tons of sugar by the Trading Corporation of Pakistan. This was done after thorough appraisal of the situation from time to time as such lifting was staggered in lots of 100,000 tons each in November 2003 and January 2004 and process of 300,000 tons still underway.
    It may be noted that sugarcane crushing process terminated by April 2004. Procurement of this quantity by the TCP has been after several meetings on joint federal and three provincial ministerial level with representatives of the sugarcane farmers organizations and the PSMA. It was not an act in isolation or unusual.
    For the latest four years at a stretch, sugar industry has been compelled to carry unusually high and rising load of stocks each. A huge surplus has been blocking its funds and kept sugar price depressed, inflicting huge losses to the industry.
    Sugar availability, surplus stocks:
    * Includes 531,930 tons on processing raw sugar by the industry.
    ** Exports by TCP.
    In the three years, stocks with the sugar industry doubled, with highly adverse impact on prices, revenues, liquidity and extending it eventually to eroding equity. Is it pampering?
    The writer seems totally ignorant about rigid regime relating to cost of sugar production, sharply contrasted by market mechanism determining sugar sales price. This greatest paradox appears to be unknown to him.
    Can any writer justify his analysis by ignoring facts of primary consideration and question pragmatic decisions? Sugarcane support price is fixed by the government, on average constituting 65 to 77 per cent of the production cost.
    Similarly, wages, utilities and other costs of production process have been about 16 per cent. Variable costs aggregate to 87 per cent and this ‘minimum’ is determined by the government while the industry has no say in it.
    Huge load of unsold stocks, creating oversupply, contrasted by inelasticity in demand plummeted persistently sugar price like proverbial nine pins. This can be seen from the following.

    Season          Average wholesale       Price fall

    price, Rs/ton Rs./ton

    2000-01 24,159 –

    2001-02 20,416 3,743

    2002-03 18,299 2,117

    2003-04 17,099 1,200

    Now look at other side of the coin. Assume, if sugar industry would not have existed, what would have been the economic scenario. Import of three million plus tons of sugar @US$ 275/ton would cost US$ 825 million and proportionately more by higher price.

    Sugar availbaility, surplus stocks
            (in thousand tons)
    Season 2000-01 2001-02 2002-03 2003-04
    Opening stock 27 634 637 759
    Sugar production 2484 3227 3684 4016
    Imports 1165 3 8
    Available 3676 3913 4329 4775
    Consumption 3042 3227 3472 3600
    Surplus 634 637 859 1175
    TCP procurement 100** 500
    Net surplus with industry 634 637 759 675

    Curtesy: The Dawn

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