While the inherent weaknesses and inefficiencies of Pakistans sugar industry are often discussed, a comparison with the countrys eastern neighbour provides good analogical insights.
The Institute of Cost and Management Accountants of Pakistan (ICMAP) took this unconventional angle of analysis in their report Capacity Utilization of Sugar Mills in Saarc Countries, which compared the sugar industries of India and Pakistan.
While the sugarcane cultivation area decreased in 2008-09 in both India and Pakistan, the decline was greater for Pakistan. This behaviour depicted crop substitution by farmers, as they shifted to other crops, such as rice in Pakistan. The lower acreage of sugarcane cultivation was the reason for the decline in sugarcane production in the two countries. Further, shortage of irrigation water in 2008-09 and tardy payments by mill-owners to sugarcane growers that discouraged the cultivation of the crop were also responsible for pulling down sugarcane production in the two countries.
While the issue of reduced sugarcane cultivation seems unanimous in both countries, India fares better than Pakistan when it comes to sugarcane yield. Pakistans yield stands lower than the world average of 65 tons per hectare, while Indias is above it. Low yield in Pakistan can be attributed not only to issues with inputs, such as shortage of irrigation water, high input prices and non-availability of inputs at required stages of cultivation, but also to inefficient practices such as delays in crop planting and harvesting, excessive rationing and cultivation of unapproved cane varieties.
Besides these, further efforts to enhance cane production and yield - such as through credit financing and R&D - remain modest in Pakistan.
In addition to a lower cane yield, Pakistan also lags behind India in the sugar recovery ratio - an important indicator of the technical efficiency of sugar mills. The ICMAP has identified two reasons for Pakistans lower recovery ratio, which is lower than the world standard of 10.5 percent. Firstly, sugarcane quality deteriorates during transportation, with the recovery ratio is estimated to fall by 0.1 percent for each day in transit. Middlemen, who buy from growers and sell to millers at higher rates, may cause an unwarranted delay as they hunt for higher prices for the crops. Besides, long distances can also be held responsible for the lengthy transportation time.
Secondly, mills in Pakistan are relatively inefficient when it comes to juice extraction, with the current extraction efficiency standing at 90-92 percent relative to a usual 98 percent. Further, if trash is muddled up with cane, efficiency further suffers.
The ill-famed capacity utilisation of Pakistani mills is also low compared to that of sugar mills in India. Unplanned expansion of Pakistans sugar industry in the last decade, especially considering that sugarcane production also declined, is a key reason for the less-than-satisfactory capacity utilisation. Experts claim that new mills set up in a rush do not run on economies of scale, and therefore amplified inefficiency and low capacity utilisation.
While capacity utilisation in India also fell in 2008-09 relative to the over 100 percent utilisation in 2007-08 because of the decline in sugarcane production, it is still greater than that of Pakistani mills. Overall, yield, recovery ratio and capacity utilisation are the Achilles heel of Pakistans sugar industry, which need to be paid attention to, to bring about gains in efficiency.
===========================================================
Pakistan - India comparison
===========================================================
Pakistan India
===========================================================
Average sugar production (mn tons) 3.4 19.3
Average yield (tons per hectare) 48.8 65.6
Average recovery ratio (%) 8.8 10.3
Capacity utilisation (%, 2008-09) 51.4 63.0
Number of mills by 2009 81.0 624.0
===========================================================
Source: ICMAP
Comments
Comments are closed for this article.