Sugar mills refuse crushing on unfair price

ISLAMABAD: Sugar mills on Monday refused to start crushing till the government removes the existing mismatch between prices of sugarcane and sugar that they said would render them Rs15 a kilogram of loss.

Pakistan Sugar Mills Association (PSMA) said if they start crushing at the existing prices of sugar and sugarcane, there will be daily losses of six million rupees to Rs25 million depending on the capacity of the mills “with the larger ones losing more money”.

“The key question to ask is why would a business solely set up to crush sugarcane with approximately half a trillion rupees of investment (90 mills with an average value of Rs6 billion) with an off season of 7 months, not want to run this season,” Aslam Faruque, chairman of PSMA said.

Cane crushing has already been delayed more than a month as it usually begins from the start of October. Delayed crushing caused a slowdown in overall large scale manufacturing index last year.

The PSMA has, for the past couple of years, repeatedly asked the government to allow timely exports to reduce surplus of sugar, stabilise local market prices and earn foreign exchange for the country. However, governments have been consistently dragging feet on timely exports permission and thereby unduly depressing local prices of sugar to levels “which are now untenable”.

Earlier last month, the government allowed export of one million tons of sugar, but the sugar millers were not content with the conditions attached with export permission. The main condition is settlement of the outstanding of billions of rupees of the cane growers and to start crushing season from November 15.

The high minimum support price of Rs180/40kg set for sugarcane for the last four years has, however, motivated the growers to plant more sugarcane, which has caused

the country to produce bumper crops and as a consequence the nation has become a surplus producer, depressing local sugar prices.

Sugar prices are on the rise in the international market, making it attractive for sugar millers to export the produce. Yet, they are not ready to pay the arrears and also did not start crushing from November 15 in line with the government’s demand.

Industry officials said successive governments overlooked end-consumer prices while fixing cane prices. Faruque said PSMA has been making all-out efforts to reach an amicable solution to the past dues of the industry since the new federal and provincial governments took charge.

The industry official said there is a main issue of Rs14 billion payable to the mills that exported sugar and earned precious foreign exchange and also made payments of approximately Rs300 billion in sugarcane liabilities to growers.

“Sadly, despite many meetings, not a single issue has been resolved and no positive direction has been taken by either the federal or provincial governments,” Faruque said. “If timely decisions are taken today, the situation could be 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?” Pakistan sits on a major surplus but exports are still not allowed due to harsh conditions set by the government.