Bitter reality of sugar industry

This time of the year brings same old problems for farmers; late sugarcane crushing, minimum support price, and outstanding dues. Will the government make a difference this time?

Bitter reality of sugar industry

The already late sugarcane crushing season is finally commence in the country, but the struggles of sugarcane growers to get arrears and sell their crop continue. Farmers are demanding an immediate solution to three serious concerns; commencement of sugarcane crushing, minimum support price, and timely payment of outstanding dues.

Sugarcane in Pakistan is grown on approximately 1.2 million hectares and provides the raw material for 90 sugar mills. The sugar industry is the country’s second largest agriculture-based business after textiles. Among the provinces, Punjab accounts for 65 percent of sugarcane area, Sindh 25 percent, and Khyber Pakhtunkhwa 10 percent.

The country’s sugar industry is dominated by political heavyweights -- powerful politicians sitting in the national and provincial assemblies own majority of the sugar mills.

Former president and co-chairperson Pakistan People’s Party (PPP) Asif Ali Zardari and Dr Zulfiqar Mirza are big stakeholders in Sindh. Similarly, the Sharif family owns many sugar mills in Punjab. Apart from the Sharif family, the politicians who own or have owned sugar mills in Punjab include the Chaudhrys of Gujrat, Jahangir Khan Tareen, Zaka Ashraf, Nasrullah Dreshak, Humayun Akhtar Khan, Makhdoom Ahmed Mahmood, Mian Mohammad Azhar and Khusro Bakhtiar.

Abbas Sarfaraz Khan, a former federal minister in General Pervez Musharraf’s cabinet and nephew of former chief minister NWFP (now KP) Mir Afzal Khan, owns five sugar mills in KP.

On the other hand, the growers who provide raw material to the second largest industry have to fight to sell their crop as seen in the delay in sugarcane crushing.

Chairman Pakistan Kissan Ittehad (PKI) Ch. Anwar calls it unfortunate for the badly affected segment of the agriculture sector, the sugarcane grower. "It is common for farmers to protest across the country on two occasions; first at the delay of crushing, second to collect arrears."

The latest demonstration has compelled the governments of Punjab and Khyber Pakhtunkhwa (KP) to bound mill owners to start crushing immediately, something they choose to delay in order to force farmers to reduce the cost prices of their produce. KP Chief Minister Mehmood Khan has threatened to take control of the sugar mills’ management through administrators if owners try to delay the crushing process.

In addition, the governments have maintained the minimum support price (MSP) at Rs180 per 40kg which has been the same since 2014 for Punjab and KP, and for Sindh it is Rs182 per 40 Kg.

The federal and provincial governments do accept that outstanding dues of farmers is a serious issue that need to be resolved as quickly as possible. PKI claims that total amount of arrears across the country is nearly Rs.9 billion and most of the amount is due in the Punjab.

"Typically, mills are bound to pay farmers the MSP, however, no one gives the price during the season. The normal rate revolves around Rs125 to 140 which is ridiculous. Regrettably, the government which sets the price does not play its role to ensure that farmers get the price set by the government," Ch Anwar says.

Spokesperson for Pakistan Sugar Mills Association, Muhammad Arif, rejects Ch Anwar’s claim of not paying growers as per the set price. "Rs180 is not for all the varieties of sugarcane. In fact, the MSP rates are based on quality, water content, variety, and other factors. The approved variety of sugarcane can be purchased according to MSP otherwise."

The growers in Sindh are still waiting for the crushing season to start. President Pasban Democratic Party (PDP) Altaf Shakoor takes it as a routine in Sindh. PDP is a socio-political group primarily working for the rights of farmers and other deprived segments of the province. "The provincial government has always proved itself as blind and deaf on the problems of sugarcane growers."

He adds, "Numerous sugarcane growers are burning their crops because the crushing season is delayed, arrears are not paid and rate is not set according to the production cost. Every year sugar mills mafia blackmails growers by delaying the crushing season, purchasing produce at low rate and halting their payments. This situation has compelled farmers not to grow sugarcane crops any more."

GAIN Report published by Global Agriculture Information Network in April 2018 indicates that sugarcane production is decreasing. According to the report the 2018/19 sugarcane production is forecast at 72 million metric tons (MMT), down 12 percent from the revised 2017/18 estimate, and area decreased 9 percent as compared to a year ago as farmers shifted to cotton.

"Farmers’ concerns about late payments from mills and reduced pricing appear to be a significant factor behind the reduced sugarcane area," the GAIN Report points out.

The federal and provincial governments do accept that outstanding dues of farmers is a serious issue that need to be resolved as quickly as possible. PKI claims that total amount of arrears across the country is nearly Rs.9 billion and most of the amount is due in the Punjab.

Spokesperson for Pakistan Sugar Mills Association Muhammad Arif rejects the claim saying that there are hardly any outstanding dues. However, the Punjab Minister for Food Sami Ullah Chaudhary does accept that arrears are yet to be paid though the amount being claimed by the PKI is not justified.

"The amount is far less than the claim because they have not provided receipts against their claims. However, we will ensure the outstanding dues are paid at the early stage of the current crushing season. According to the agreement made with mill owners, they have to pay either cash to farmers or sugar against the arrears otherwise we will not hesitate to lodge cases against them," the minister warned while talking to TNS.

According to the Sugar Factories Control Rule 1950 section 14(2), "The occupier or purchasing agent shall make all payment for cane at the purchasing centre within fifteen days of the delivery. The occupier or purchasing agent shall be liable to pay interest at the rate of 11 percent per annum on unpaid balance of payment of cane, from the date of delivery of the cane, in case where such payment is not cleared within fifteen days of its delivery."

Keeping in view the above-mentioned sections, there is no proof of a claim made by any grower, nor has the concerned authority ever ensured the implementation of the rule.

In the past, the government has offered subsidies to millers trying to give an impression that such subsidies would help millers to acquire sugarcane from growers at the prescribed rate and ensure timely payments to farmers.

The government paid Rs45 billion in November 2017 to millers as subsidy when they declined to purchase sugarcane from the growers. Moreover, the Cabinet’s Economic Coordination Committee (ECC) allowed the export of 1.8 million tons of sugar and granted additional subsidy of over Rs31 billion to millers.

"Unfortunately, every government serves the politically influential industry by giving them huge subsidies at the cost of taxpayers’ money and also allows them liberal export of sugar," says Altaf Shakoor.

PKI has suggested the Punjab government to allow growers to establish small crushing units that may help tackle the millers’ monopoly and cater to farmers’ financial interests.

The minister, Sami Ullah Chaudhary, declares the government is ready to facilitate growers and other businessmen at all levels if they come up with a solid business plan.

Bitter reality of sugar industry