Who is to blame for making a mess of the sugar economy, if not the government? All the stakeholders – growers, factory owners and consumers – involved in the trade blame the government’s ad hoc policies in the recent years for setting off the ‘persisting crisis’ in the sector that has hit all of them hard at one point or the other.

What has been going on in the sugar sector for the past several years is the consequence of the inability of the country’s previous economic managers – most continue to be part of the current caretaker set-up in the name of continuity of economic policies, to plan for the future and regulate the supply of the sweetener in accordance with its demand..

Both in times of plenty and shortage since 2002, the government moved in the sugar market on the pretext of protecting the interests of one stakeholder or the other. But that always happened too late, and the government’s presence in the market could make little or no impact. In fact, the official intervention often distorted the market rather than helping it and in the process we saw both the government and those involved in the trade losing hefty money.

In the early 2006, for example, the sugar prices touched their historic peaks in the home market and the consumers paid Rs40-48 per kilo for several months. The government did intervene and allowed duty-free import of the product from all sources, including India, to stabilise the market and bring down the sweetener’s prices to what it called ‘safeguarding’ the interests of the consumers. But that happened only after the consumers had lost a few billions by paying very high price for the product.

And then the government let an excessive quantity of the product come into the country, leading to yet another crisis. The millers refused to start crushing on time because they still had huge unsold stocks with them. The cane growers allege that the late commencement of sugar production last year made them lose billions of rupees because the delayed harvest of their crop reduced its weight.

As in the past few years, the sugar industry is once again at the centre of a new controversy for deliberately delaying the commencement of fresh harvest on November 10 as agreed between the government and the factory owners.

Defending its decision to start late crushing, the industry insists that the production of fresh stocks in the presence of huge unsold stocks of the product – the carryover stocks for the next season are estimated to be around 480,000 tons, from the previous season could destabilise the home market further and bring the prices under pressure. “Thus, it does not make any economic sense to begin the fresh harvest before the end of this month,” the miller says.

The international sugar prices are already under severe pressure because of glut production in India and Brazil. The world sugar surplus during the next harvest is expected to be over 10 million tons, which is likely to keep its world prices low. Pakistan too is expecting production of 4.5 million tons next season against a home market of 3.9-4 million tons in view of bumper cane crop of 62.30 million tons. That is likely to hold down the sweetener’s rates in the local market.

It was in view of the forthcoming general elections and expected bumper cane crop that the government in September approached the millers to begin early crushing. As was expected, the millers refused to oblige. “The government did not keep its promises last year and we had to suffer huge losses because of its wrong policies and were not prepared to begin production unless our unsold stocks were lifted by the Trading Corporation of Pakistan (TCP),” the millers say. Legally speaking, the mills can delay crushing until end of November.

The government obliged, and agreed to a proposal that the TCP will procure 400,000 tons of sugar from the mills by the end of the next crushing season and form a strategic buffer stock to stabilise the market and keep the prices from going up beyond a certain point if the mills became operational by November 10.

The TCP has purchased or is in the process of procuring 75,000 ton of the product from the mills. Yet less than half of 80 factories had started production operations by the end of the third week of this month. Officials and the factory owners insist that the remaining mills are starting their operations and all of them would start crushing before the month is out. But some Punjab Agriculture Department officials and growers don’t expect the industry to begin its production operations even at the end of this month.

“The mills may fire their boilers by the end of this month but most of them will not commence crushing before middle of next month. A mill requires at least 20 days before starting actual crushing after firing the boilers,” said a Punjab agriculture department official who refused to give name.

Former chairman, Pakistan Sugar Mills Association (PSMA-Punjab), Javed Kayani assures that the millers are preparing their mills for starting crushing and all factories will start production in a few days before the end of this month.

The delay in the start of next harvest, claim farmers, would result in hefty losses to cane growers. “The delay in the harvest dries up cane and reduces the crop weight. The delayed crushing allows the millers two advantages: One, they have to pay less for their procurement due to reduced crop weight. Two, the longer you keep sugar cane, it increases its sucrose content recovery,” says Pakistan AgriForum Chairman Ibrahim Mughal.

Nevertheless, the late harvest is not the only worry for farmers – who say that their wheat sowing will also get delayed because of this. The more worrisome is the record cane production, which in turn is going to lead to reduction in the price they received for their product last year. “Farmers brought greater area under cane cultivation because they got a premium on their crop owing to short crop (around 50 million ton) last year,” Mughal says.

In Sindh, the cane growers got over Rs70 per maund against the minimum support price of Rs67 last year and in Punjab the price hovered between Rs65-70 per maund against the support rate of Rs60. In the NWFP, too, the farmers sold at a premium against the support price of Rs65 per maund. The government has not changed the minimum support price this year because it could push the sugar rates up in the home market.

Indeed, a fresh wrangling between factory owners and growers cannot be ruled out if the prices of cane drop below the minimum support rates as is being expected. It can also work against the interests of the Pakistan Muslim League, which completed its term in the government on November 15, in the January 8 elections.

If the government somehow tries to force the industry to pay the farmers the minimum support price as well as keep the rates of their own product low in line with the present international trend and in order to avoid public criticism, it is likely to risk yet another dispute with the factory owners. So what is the way out?

Both Kayani and Mughal maintain that the government needs to make a concerted effort to develop a long-term sugar policy that protects the divergent interests of all stakeholders, that is, growers, industry and consumers. Unless that is done, they say, the tensions in the sugar sector will continue to persist.