Last week, the Pakistan Sugar Mills Association (PSMA) met Punjab Chief Minister Shahbaz Sharif and other senior leaders of Pakistan Muslim League-Nawaz (PML-N), including Rana Sanaullah and Ishaq Dar, to ask the Punjab government for subsidy on sugarcane procurement. The Sindh government has been giving a subsidy of Rs12 per maund (40kg), while the sugar mill owners in Punjab are demanding a subsidy of Rs22 per maund.
In a press conference last month, PSMA Punjab Chairman Javed Kyani said they only wanted a level playing field.
While the government has refused the PSMA’s demand for a subsidy, sources privy to the mill owners’ meeting with provincial government representatives reveal that government has agreed to give out loans against sugar that has already been procured. PSMA’s Punjab zone meanwhile, spearheaded by Mr Kyani, wants interest-free loans at a three- or five-year term ostensibly to safeguard sugarcane growers in the province.
Mills make trolleys wait in the sun for days
The farmers, however, are sceptical of PSMA’s intentions.
“Sugarcane is cultivated in February and harvested in November-December. This requires a year-long investment of fertilizers, water, sprays, electricity, etc,” says Pakistan Kissan Ittehad President Rao Tariq Ashfaq.
“It’s April, and the sugar mills have owed the farmers Rs39 billion since April,” he adds. “The farmers have started working on next season’s crop. The electricity bills have to be paid. The families’ bread and butter have to be taken care of. Other expenditures have to be settled. What should the farmer do?”
Ashfaq highlights how the farmers are exploited by mill owners.
“The farmer harvests the sugarcane himself. Loads it himself and then takes it to the mill on his own trolley. The mill owner leaves the trolley to dry in the sun for 4-5 days, which reduces the sugarcanes’ weight and benefits the owner.”
The Competition Commission of Pakistan’s 2009 enquiry report of ‘Collusive Practices in the Sugar Industry,’ highlights how the excuse of ‘low quality’ cane is used by mill owners to reduce the price. Ashfaq claims 10-15 maunds out of a 400 maund trolley is usually dumped this way.
Former PSMA Chairman Riaz Qadeer Butt, however puts the onus on the delay in payments on the Punjab government.
“As long as there’s disparity between sugarcane prices and the price of sugar, the payments will continue to be delayed,” he says. “We were ready to shut down the mills last year, because we weren’t even recovering the production cost. Then we were told that the Sugarcane Act doesn’t allow us to do that. Mr Shahbaz Sharif gave us reassurances about compensation.”
The Kissan Ittehad president suggests another reason why mill owners might be delaying payments. “From what I understand the sugar mill owners are waiting for a hike in sugar prices. If the mill owners were to take loans from the bank, it would come out of their own pocket. As the temperature rises, the demand for sugar increases. And with Ramazan coming, the price will further increase. So this is what the mill owners want: not pay the dues initially and then pay them off – if at all – when the price is at its optimum.”
Ashfaq also claims that the mill owners don’t seem to factor in other sugarcane by-products when highlighting their overall revenue. “The molasses from the sugarcane mills are being exported to Central Asia and all the way to Russia, where it is used to create vodka. Even sugar waste is a great source of phosphorus and zinc, and is being used in fertilisers.”
Butt says the mills remain in loss despite the revenue generated from all the by-products. “The government has the figures as well, which is why they are willing to compensate. Also, the quality of our ethanol is no way near good enough to be used in vodka. You need proper machinery to extract that quality of ethanol, and that kind of mechanism isn’t available in Pakistan.”
Ashfaq also reveals why the sugar price hasn’t been impacted by the reduction in fuel prices. “The farmer’s input in the sugar crop is from last year when the fuel rates were high. The fertilizer price hasn’t decreased either. The same is true for sprays and electricity. The impact of fuel price reduction should be seen in the next season’s rates. Crops that don’t have year-long preparation have seen reduction in prices, like rice and cotton.”
So what is the solution to the dispute between farmers and mill owners over payments? While Ashfaq doubts PSMA’s sincerity, Butt is clear that only the government can come up with the needed answers.
“The Punjab government has to provide financial support if they want the sugar mills to function. This is what Sindh government is doing, and this is what the Indian government is doing in our immediate neighbourhood.”
