Sugar millers: carrying the pains of growers

The incessant saga regarding official sugar procurement continues. In a sharp move last week, the Economic Coordination Committee struck down the tender which was floated by TCP on November 4 to procure 200,000 tons of sugar from local sugar mills. Citing a mismatch between the quoted and prevailing sugar prices, the ECC ordered TCP to invite fresh bids, third time this year. Yet the commotion persists. The sugar millers contention is that they lose billions if they sell to the government at or around current market price. The sugarcane growers are worried that they are not getting fair price for their crop as the prices of sugar, which the mills take into account during sugarcane purchases, have come down lately owing to excess stocks and anticipation of high sugar production this season. With exports banned and bulk sovereign buying the only viable option, sugar mills would eventually have to sell to the government. Interestingly, the much-maligned and oft-vilified sugar industry appeared anxious about the interests of sugarcane growers during this whole episode. The Pakistan Sugar Mills Association has been beseeching the government to procure sugar so that growers are paid on time. The PSMAs messianic stance seems legitimate; however it is deemed too good to be true by the grower community. It appears they have no love lost for the influential industry association and its member mills, and their resentment is hard to ignore. Last week, Agri Forum Pakistan, a growers body, alleged that sugar mills were delaying payments to the growers on the pretext of delay in TCPs sugar procurement. Syed Qurban Ali Shah, Chairman of the Sindh Sugarcane Growers Association, doubts the motives of sugar industry. Speaking to BR Research, he said "Sugarcane crushing in most parts of Sindh has not been started by the mills, despite the Sindh governments notification to do so by November 15. What to talk of fresh buying, mills still owe to growers payments from last year". Some growers feel that TCP, whose mandate is to protect consumers from commodity shocks, has been reduced to bailing out sugar barons. "Mill owners would have us believe that they are doing the growers bidding by asking the government to buy sugar or allow its exports. This is really rich coming from them since they are the ones guilty of exploiting poor growers and are wary of maximum capacity utilization", lamented a grower. Dr. Qadir Bux Baloch, former federal commissioner for agriculture, contends that the ultimate victims of the tussle between government & mills are the growers. "In Punjab, the sugarcane growers are getting between Rs100 and Rs125 per maund, which is way less than the support price of Rs150 per maund". Growers also seem to be put off by the fact that PSMA was invited to the ECC meeting last week, while the farming community was ignored. But the suspicions run deeper than that. "This flip-flop on sugar procurement is a win-win situation for both the parties: government and sugar mills. The government politically benefits from falling sugar prices, while mills buy sugarcane cheaply in the peak of crushing season. But the grower is being destroyed in this grand scheme", observed a disgruntled grower from Punjab. Yet things have to be kept in perspective. Iskander Khan, the outspoken former Chairman of PSMA, told BR Research, "Let me break it down for everyone: besides being subjugated to another controversy, the sugar industry has already lost three to four billion rupees due to government apathy. However, the situation can still be salvaged for sugarcane growers if the government acts now and allows the industry to export 5 lac tons of sugar". The way out is clear: get rid of excess sugar, and get rid of it fast. Doing so, via procurement or exports, will help in stabilizing sugar prices, and in injecting liquidity in the industry to buy fresh sugarcane and return bank loans, besides ensuring that the sugarcane growers fetch decent price and receive timely payments. The talk of market liberalisation and targeted subsidies is left for some other time.