Rs 225b payment to cane growers on stake   

LAHORE, December 19, 2011: The payment of Rs 225 billion to the sugarcane growers by the millers is now on stake, as the federal government is neither purchasing the surplus sugar stock nor it is allowing the manufacturers to export it, enabling them to make in-time payment to the farmers.

Presently, the sugar mills owed Rs 25-30 billion to the banks, besides they have to pay around Rs 225 billion to the farmers while next year sugarcane crop of around 60 million tons also awaiting. So, the government should evolve a mechanism to timely purchase the sugar from the millers to ensure the in-time payment of Rs 225 billion to the farmers, which is now on stake only due to the government, industry sources told The Nation. If the government does not purchase sugar at Rs 65 per kg, then industry should be allowed to export the commodity up to 500,000 tonnes as the country’s demand of sugar is 4.3 to 4.4 million tonnes and it would have a surplus in the current season,” sources said, adding export of surplus commodity should be allowed to save the industry as well as the farmers.

The export of the present surplus stock would enhance the liquidity of sugar mills which would enable millers to make prompt payments to growers during the next crushing season. Last year, the sugarcane rate stood high, translating into sugar price at Rs 65 per kg, they said. “If the government procures 0.2 million tons at Rs 53 per kg against the price of Rs 65, the sugar industry would suffer a massive loss of Rs 2.4 billion that will ultimately hit poor farmers. However mills would not be able to pay farmers even the support price. They added that it is a promising industry, with great potential to energies rural Pakistan, contributing substantially to socio-economic growth and development. Sources suggested that it is imperative that proper advance planning be made before advent of each season in consultation with PSMA for smooth functioning of sugar industry and sugar supplies.

PSMA Central Chairman Javed Kiayani, while talking to The Nation, said sugarcane production was expected to be around 54 million tons and production of sugar was forecast to be around 5 million tons. “With a carry-over stock and after meeting the domestic requirement of 4.2 million tons, there would still be a surplus sugar of over one million tons in the country and it is imperative to dispose it off in order to make payments to growers. We have around 0.8 million tons of sugar surplus also in the next season,” PSMA chairman stated.

Javed Kiyani urged the government to timely purchase the 0.2 million stock of sugarcane and if the government does not want to buy it from the industry, it should be allowed to export which is their legitimate right without which the growers would be deprived of their payments. He said that the government has to take such a decision, which does not kill the local industry and make them to defaulters of the banks. Besides, the government should also kept in mind that the million of farmers, who rely on sugarcane crop, would also suffer due to the illogical ban on surplus sugar export. According to him, at present there is no level-playing field for the industry because the government has imposed restriction on the export of sugar and the industry is not in a position to continue its operations.

He said that sugar industry operated in a highly regulated environment where price of sugarcane is fixed through demand-supply mechanism and it lifts the entire sugarcane from the growers’ fields. He said the small and poor growers are dependent for their existence on the sale of sugarcane therefore it is the prime and foremost responsibility of the government to take care of their interests first. During the last two years, PSMA strongly advocated that sugar should be imported to meet any likely shortages in the country but now it has a surplus carry-over and a bumper crop ahead.

Now the government wants to build its reserves for two months requirement to cater for utility stores and off-loading in the open market to intervene against any price spiral. The government through purchase from local industry would save precious foreign exchange besides helping the farmers of the country, he said. The government would save about Rs 6 billion on the purchase of 200,000 tons of sugar from the local manufacturers.

However, if the industry is allowed to export it gets an export parity of Rs 59, so this price should serve as a minimum bench mark to purchase from the industry as against landed cost of imported sugar at around Rs 88-89 per kg.


Courtesy: The NATION