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Causes of sugar crisis
By Dr Ali Muhammad
Khushk and M. Ibrahim Lashari
Sugarcane is the second largest non-food crop after cotton
and ranks fifth in respect of acreage. Prolonged drought and
heat stress decreased its production by 22 per cent in
1999-2000, and further 17 per cent in 2000-01.
 Of
late, there has been confrontation between growers and
millers over price. Growers demand higher price for their
raw material and millers complain about increase in
production cost and imports.
Late crushing causes dissatisfaction as well as financial
loss to both, farmers and millers. Other problems are
stagnant cane yield, non-payment of dues to growers by
mills, and low import parity prices.
A study it revealed that more than 65 per cent farmers have
decreased the total area under cane production due to water
shortage, behaviour of the mills’ management, late payments,
increased input cost, and diseases and rodent attack.
Constraints faced by the growers are underweighting of cane
at purchase centres and mill gates, undue deductions by
mills up to 10 per cent, delays in payments, middleman,
obtaining an indent, and the payment of premium.
The price structure is such that out of the sale price some
35 per cent of the cost goes to farmer and 24 per cent to
the government in taxes etc., 21 per cent to mills with nine
and six per cent to wholesalers and retailers respectively.
The country exports sugar at low price and imports the same
at high rates.
Transporters, particularly trolley-owners also exploit mill
owners by demanding additional Rs250–300 per trolley during
cane shortage, while a delay in unloading at the gate incurs
an additional Rs100 per day for trolley along with the
provision of food and tea for trolley drivers etc by the
mills.
The government intervenes by issuing export permits to
mills, importing sugar on public account and controlling
retail distribution below the market price through utility
stores.
Production, consumption and demand play an important part as
production depends upon support price. The support prices of
sugarcane affect the production cost and uncontrolled
factors such as weather and technology. The volume of cane
crushed is mainly related to production, milling capacity
and prices of cane and gur.
Consumption relationship indicates the price elasticity for
refined sugar as four and income elasticity as eight in
nominal terms. This implies that relatively small change in
cane supply causes more proportional increase in sugar
price.
Sugar mills, producing in excess to market’s demand are
portrayed as going through a difficult period and in need of
the state support. Thus many are provided the government’s
assistance in a situation that is not the responsibility of
the state.
It is a case of state backing a resourceful segment for the
exploitation of national resources and rake off operations
against the general public. Mills owners are one factor in
building the sugar crisis- their reluctance to pay growers
the right price promptly.
The purchasing of excess stocks from mills and delayed
payments to growers, and delay in crushing are bad aspects
for the industry.
Another aspect of delay in crushing causes a negative impact
on wheat crop that replaces it in many fields across the
country.
These factors create shortage thus increasing the price of
the commodity. These factors are manoeuvred towards a
specific end by a plan jointly managed by the elements that
should have been working to control the price escalation and
meet the shortage.
The latest move to resolve the crises is a strange one.
Supply to the Utility Stores has been doubled with a view to
providing relief to public.
The Utility Stores are selling one kg of sugar for Rs27,
while in the market it is available at Rs37-38. A price
difference of Rs15 is unheard of and, to the say least, is
not natural.
There is an upward trend in sugar price in the international
market but the almost double domestic rate is simply not
justifiable.
The shortfall of up to one million tons could be eased if
the buffer stock available with the Trading Corporation of
Pakistan (TCP) is utilised. The stock has cost the TCP Rs18
per kg.
Policymakers have failed to realise the gravity of the
situation. Instead of checking the price hike, a free hand
has been given to hoarders and profiteers, operators of the
utilities stores for forcing consumers to buy other items if
they sought sugar at controlled price.
The government has failed in adopting a proper agriculture
policy. There is no planning at any level for important
crops, including sugarcane, and no monitoring system.
Sugar crisis persisted despite the fact that some two
million tons was produced and a huge quantity imported. The
country’s requirement is four million tons a year as against
the supply of six million tons produced by more than 70
sugar mills.
Although, the government intervention is limited in keeping
the prices at a reasonable level but maintaining
self-sufficiency in sugar production, static yield and
weaknesses in existing regulations are few problems facing
the industry.
There is a need to appoint an investigating committee to
probe the causes and suggest steps to revitalise the sugar
sector. The committee should consist of experts from the
agriculture, marketing, pricing, industry, sugar technology
and the financial institutions.
There is need for seed treatment in sugarcane cultivation.
Agencies such as research and extension department should be
directed to enhance the knowledge of growers through
demonstration.
Sugar mills should be bound to arrange and distribute seeds
of high yielding varieties on easy terms to enhance
production and to reduce poverty.
Awareness among farmers on the balanced use of fertilizer be
enhanced and the government should take necessary steps to
increase its supply at reasonable rates and at proper time.
Demonstration plots should be organised by the Extension
Wing of Agriculture Department at least on village level to
disseminate information among the farming community in an
effective manner.
Courtesy: The DAWN
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