KARACHI (January 14 2004): Despite the Sindh government's assurance, none of the three-point package for the revival of Sindh sugar industry has been implemented.

This was pointed out in a working paper, which was prepared by the Pakistan Sugar Mills Association (PSMA), Sindh zone, for the first meeting of the recently revived Sugarcane Control Board, which remained dormant for more than 17 years - since 1987 - held in Hyderabad on January 7.

It said the 2002-o3 season was put into operation on specific and categorical assurances that the following package would be implemented:

-- A bridge financing facility of at least Rs 3.50 billion at concessional rates.

-- Arrangements made for 500,000 tonnes exports of surplus sugar of Sindh with financial support of cost-price differential.

-- Exemption of sugar industry from effective sales tax at 18 percent.

Sugarcane support-price of Rs 43 per 40 kilograms for 2002-03 season was subject to a lot of disputes and deliberations.

The paper further said Rs 43 per 40 kilograms in Sindh and Rs 40 per 40 kilograms in the Punjab for 2001-02 had already done big damage to the sugar industry of Sindh.

It was not an economic proposition to commence 2002-03 crushing season in prevailing discrimination and the Sindh sugar industry expressed its unwillingness to commence 2002-03 campaign in the given situation.

However, the 2002-03 season was put into operation on the support assurances of the Sindh government and also of the Federal government.

The paper said the sugar industry suffered huge losses for the second year in succession, and added it was not feasible for the sugar industry to pay any more as it had no resources.

Besides, the subject of sugarcane price at Rs 43 per 40 kilograms was subjudice in several cases, it said. Other points highlighted in the working paper are:

-- Sections 10, 12, 13,14 of the rules of Sugar Factories Control Act 1950 and relevant rules being inoperative since 1988 have made sugarcane marketing free at the sugarcane growers insistence.

As a consequence, the paper said, the system of issuance of indents had become superfluous and inapplicable. It was not adaptable, as it bore no binding on and compliance by the sugarcane suppliers.

Free market concept and practices were applicable to the farmers and mills with even force and there could not be any discrimination, it said.

On the strategy to curb the tendency of purchase of sugarcane through brokers at reduced rates instead of purchasing the cane from the growers, the PSMA said that this tendency arose on selling sugarcane by farmers to other than sugar mills.

"Sugar mills in the free marketing of sugarcane cannot vouchsafe the suppliers' identity. Its enforcement by sugar mills will be contrary to free marketing spirit of sugarcane sales and supplies," said the PSMA.

Regarding the progress of refund of amount of surcharge to the growers, the PSMA said that the refund surcharge was under review. On the payment position of cane price for 2003-04, it said that the cash flows had persistently been negative.

In the absence of support from the governments of Pakistan and Sindh, which was nowhere visible to retrieve the catastrophic situation, despite repetitive assurances, the PSMA said the factory would either face closure or defer payment.

Details have also been provided about the figures of cane crushed, sugar produced, recovery position and stock position for the 2003-04 crushing season.

Reviewing payment of quality premium for the 2002-03 year, the PSMA said that since sugar industry was not in a position to pay the discriminative price of Rs 43 per 40 kilograms, it was not possible to make more payment under any other nomenclature, more so as quality premium was not being prescribed in Punjab since 1995.

"This is an additional price disparity and the matter is also subjudice in several cases," it said.

Finally, the PSMA said that the economic issues be resolved by economic means and not by administrative actions, hence it requested that the sugarcane price be linked with sugar price.

"Insulating sugarcane by support price while keeping sugar price open has created unbridgeable disruption. As the sugar industry has suffered, adverse impact is bound to flow down the line on sugarcane farmers, as they share a common pool of interest, being the sugar price," said the PSMA.

"The government of Sindh may consider the need for a precise sugar policy for successful making of it at the provincial level. It may also plead formulation of a sound policy at the Federal level. At present, sugar industry is being deprived of having such a system. A major casualty of it has been the Sindh sugar industry and sugarcane farmers fraternity due to Sindh being always a sugar surplus province," it said.

The PSMA regretted that the economic issue of sugarcane, vis-a-vis sugar prices, was being attempted to be tackled by administrative actions instead of economic means. This pursuit would not deliver.

Courtesy Business Recorder