Chaos of governance errors

LAHORE: By gagging media, we cannot hide the reality of our country that is starving for investment because of political instability, incompetent governance, and vindictive rulers.

Inaction during the last two years on economic front has played havoc with not only the poorer segments of the society, but even for the well to do families. Nearly two million jobs have vanished from the market.

Not only line workers, but supervisors and executives have been shown the door. The process of job creation that started during the previous regime has been reversed.

We need to create between 3.5 million to 4.0 million jobs per year to absorb the workforce we are adding in our markets every year. By shedding 2.0 million jobs we have added at least 9.0 million unemployed workforces, in the last two years (two million jobs were destroyed and 3.5 million jobs that were not created per year).

Our planners have conveniently been stating that 44 percent workers are in the agriculture sector, which is not true. Let us do a reality check.

Landholdings in agriculture have been diluted, as land has been distributed among the children of deceased farmers. It is not possible for all family members to survive on income of small farms.

Almost half of them look for jobs outside agriculture. However, when they do not find a job, the family shares whatever resources they have with the jobless family member.

After two million jobs were lost, at least 500,000 workers and their families have taken refuge with their rural families making them poorer than before.

Rising food prices is making the situation even worse for such struggling families. Instead of bringing down the prices, the government seems to be either dillydallying on the matter or is expressing only helplessness in taking any concrete measures to control prices.

A pragmatic approach is must to tackle the sugar mafia that has come up with its cost based on support price of Rs200. It claims that the production cost of sugar would be Rs87.5/kg. The government, instead of agreeing with them on their given details must do its own homework.

It is worth mentioning that sugarcane is perhaps the only crop in Pakistan that is completely utilised by the industry. It produces sugar by crushing the crop. Average sugar recovery in Pakistan is 10 percent (some cane varieties yield even 13 percent sugar). After the sugar is extracted the liquid residue left (molasses) is processed by most mills into ethanol.

In fact, for many mills, ethanol is the major product and sugar is a by-product.

The leftover solid residue is called bagasse. This is used as fuel to produce electricity. Most mills have installed power generators to produce power from this residue.

They not only run the mill on this cheap power but also supply the excess power to the state at lucrative price. The mud left after making use of all these by-products is sold as manure at around half the procurement price. Hundred kilo of sugarcane bought at Rs200 per 40 kg would cost millers Rs500. At 10 percent recovery the mills would recover 10kg of sugar costing Rs50/kg. We will come to its processing cost later.

The mill would earn at least Rs150 from extracting ethanol. Bagasse is sold to chipboard makers, which would be worth Rs50 (only part of bagasse is sold rest is used as power fuel).

The power would be almost free as the excess would be sold to state. The manure would be worth Rs50 as leftover from 100kg.

It is worth mentioning that from 100kg of sugarcane the mill would get back at least Rs250 from excess bagasse sales, Rs150 from ethanol and Rs50 from manure. The net price of 100kg sugarcane reduces to Rs250 from Rs500.

The sugar cost would be calculated on this amount which comes to Rs25/kg. Add 50 percent (abnormally high) processing charge. The net cost would be Rs37.5/kg.

It is Rs50/kg less than what mills claim. We have not taken into account the malpractices that many mills indulge in, such as weighing less, late start of crushing season, late payments to the growers (they save high bank interest by utilising growers dues), and underhand discounts they demand from growers for cash payments.

All this shows that the sugar mafia is minting money not only from its produce and raw materials, but also from the exploitation of farmers, as well as public via inflated prices. The government can no longer afford to not take action in this regard. Similarly, action is needed to restore the country’s image to improve exports. One pities Pakistani exporters who have never defaulted on their commitments to foreign buyers both on rates and timely delivery of goods. They made timely shipments in the midst of extreme terrorism, or acute power shortage in the country.

Their reputation of reliability and quality that they earned through shear hard work has been destroyed by the country’s image created by bad governance and whimsical decisions of the present government.

Exporters have also been hurt by the increase in cost of doing business. Our exports remained stagnant during the first two years of this regime and have marginally increased in the first quarter of this fiscal.