How to reconcile the conflicting
By: Ahmad Fraz Khan
ongoing cane pricing crisis seems to have exposed everyone
involved in the business.
has become highly vulnerable to pressure groups — be it
farmers or industrialists.
The industry, fed on low-priced cane for too long and
facilitated by an elaborate regime of duties and tax
relaxation, is unable, or unwilling, to vigorously innovate
and add much value to its products.
The farming community, already suffering on account of
cotton and rice crops was ready to take to the streets for
And defanged by the 18th amendment, the federal ministry
of food and research is confused about its own mandate, and
has reduced itself to advising and condemning the acts of
This is a sorry state of affairs for a country that has a
big agricultural base. The official decision-making is at
To begin with, Punjab and Sindh fixed cane prices at Rs180
and Rs182 per maund respectively, because they both had not
increased them for the past two years.
But as the industrial
pressure grew against such increases, the Sindh government
buckled and reduced the price to Rs155 per 40kg — even less
than the 2012 level, when prices were last increased.
The industry in Punjab
pressured the provincial government to follow suit.
However, before that could happen, the farmers started
protesting in different parts of the province and the
country. They threatened to besiege mills and homes of
respective parliamentarians, block national highways and set
cane on fire on the roads.
Instead of facilitating sugarcane growers through other
means — like lowering taxes on inputs or through loans — the
government tried to do so directly (through the support
price) and drove the industry out of the export market.
As the strength of the
growers’ resolve dawned on the Sindh government, it backed
off. Punjab kept mum for a few days, but as the protests
spread, it announced maintaining the price.
When the industry turned on the pressure, the provincial
governments reduced the price of cane. As soon as the famers’
protests started, they backed off. This can only be termed
The industry, on its part,
has long been relying on official facilitation, be it
through low cane prices, official buying during times of
glut, export rebates, or higher sugar prices.
Purchasing sugarcane is the
only business where procurement of cane by mills on credit
has a legal cover.
At present, sugar is available at round Rs40 per kg in the
international market — London sugar was being traded at $402
per tonne last week — against Rs58 per kg in Pakistan.
One reason is that the
industry is focused on producing sugar, which is a
by-product for the developed global sugar industry.
The international industry
produces a range of products — from ethanol to plastic —
while our industry relies on official support instead of
diversify into new products.
The industry would surely use the higher cane price as an
excuse to raise the sugar price next season, despite the
glut of 1.5m tonnes in the country at the end of the current
The government, on its part, also needs to realise that
fixing the support price for any crop entails four factors:
import position, export parity, domestic stock and the cost
Linking the price to any one
factor for political reasons, or as compensation for its
failure on other fronts, would only complicate the situation
— as it did this time.
The Agriculture Policy Institute opposed the increase in
cane price when sugar was being traded at $458 per tonne in
the international market.
The government tried to do so
when international prices had dropped to $400 per tonne
because it has not been able to reign in the farmers’ cost
Instead of facilitating growers through other means — like
lowering taxes on inputs or through loans — it tried to do
so directly and drove the industry out of the export market.
The industry cannot export
unless the government now arranges some export subsidy. The
government would pay anyway, in the shape of providing such
It is time that both the government and the industry make a
paradigm shift. The government should take a holistic view
of the crop, especially given the changing water realities.
And the industry should
diversify into new products. Until then, the government, the
industry and the farmers would remain engaged in
fire-fighting, instead of resolving conflicting interests.