A decline in sugar cane crop acreage is being anticipated in Sindh this year. Still, sugar factory owners and sugar cane growers hope for better per acre yields largely due to the monsoon rains which had a positive bearing on the crop.

A Sugarcane Control Board meeting — chaired by the agriculture minister on October 18 in Karachi — to fix a minimum sugar cane price remained inconclusive. Millers disagreed with the rate of Rs250 per 40 kilograms demanded by growers. They, however, indicated they would start crushing from November 15.

For the last six years, the Sindh government has been fixing the price at Rs182 per 40kg of sugar cane under the Sugar cane Factories Control Act. Farmers disagree with such a price saying it is unviable given their cost of inputs; the federal government has also withdrawn subsidy on fertilisers. Therefore, the price should not be less than Rs250 per 40kg.

But the millers contend that the government fixes sugar cane’s indicative price whereas the rate of sugar is not fixed and for them, even the rate of Rs182 per 40kg is not affordable given the cost of sugar production. They want the government to fix sugar’s price as well.

Farmers demand a rate of at least Rs250 per 40kg whereas the Sindh government has been fixing it at Rs182 for the last six years

The act primarily talks about fixing sugarcane’s minimum possible price per 40kg rate. Pakistan Sugar Mills Association (PSMA) Sindh zone chairman Dr Tara Chand points out that millers don’t object to a reasonable hike in sugarcane’s price. But, he says, the government must take into account the factors relating to sugar’s ex-factory per kg price. “Government doesn’t consider it and given its constraints, the sugar industry resists the sugar cane price”, he said.

In 2014, the millers had challenged section 16 of Sugar Factories Control Act 1950, which empowers the government to fix the minimum price of sugarcane, in the Sindh High Court (SHC). But the court had rejected the millers’ joint petition.

Dr Tara Chand says when the industry demanded permission for sugar exports a couple of years back to clear its carryover stocks, the government disallowed it as a policy decision, even without a subsidy. But then a subsidy was announced.

“When millers challenged the rate of Rs182 per 40kg in court in 2018, the ex-mill price of sugar was Rs48-49 per kg, but now it has increased to Rs66 per kg or so. There is a difference of at least Rs10 per kg between the retail and the ex-factory rate due to the levy of Rs10.2 per kg sales tax,” he said. He explains that since sugarcane crop takes 14 months to mature, crushing can’t start in October as demanded by growers every year.

However, a look at official dates for the crushing season between 1991 and 2001 reveals that the government had always notified that mills would start crushing in October. Even in 2004-05, October 1st was notified as the date for the start of the crushing season. In later years, however, the government issued notices of the crushing season starting in November and December, to the great chagrin of growers, leading to a permanent millers-farmers discord.

Sindh Abadgar Board (SAB) vice president Syed Mahmood Nawaz Shah calls for a strong regulatory framework that ensures implementation of the Sugar Factories Control Act, fearing in its absence the farmers will stop cultivating sugarcane entirely. “It is difficult for us to keep running from pillar to post to get their payments”, he said.

There are 38 sugar factories are located in Sindh of which 32 bought sugarcane for crushing last fiscal year. This year one more factory is likely to start the crushing process again. Last year mills had crushed 15.4 million tonnes of sugar cane to produce 1.72m tonnes of sugar. That was around 4m tonnes less than the corresponding figure of 2017-18 when 2.28m tonnes of sugar was produced from 21.52m tonnes of sugarcane.

“We expect nearly the same volume of sugar production this year, despite the 10-15pc decline in sugarcane’s crop acreage, because the recent spell of monsoon rains will lead to better yield per acre,” said Dr Chand.

Last year 279,472 hectares were brought under sugar cane cultivation against the sowing target of 322,000ha, which is 13.2pc less. The first estimate of this year’s sugar cane crop indicates that it was cultivated on 287,000ha against the target of 310,000ha. The figures indicate a disturbing trend for sugar factories which cumulatively have installed larger crushing capacity.

Growers attribute the gradual decline in acreage to factors like the belated commencement of the crushing season, liabilities and back-to-back controversy over sugar cane price. Such factors discourage growers and it appears that they are losing interest in the crop, despite the fact that other crops, particularly cotton, have not performed well.

It was only in the last few years that farmers replaced area under cotton with sugar cane. This was evident from the number of milling factories whose number increased substantially in Sindh from 30 or so to 38 in one decade.

According to growers, millers intentionally delay commencement of sugar cane crushing to get more sucrose out of the crop. “The delay in harvesting increases the sucrose level of the crop while the cane starts losing weight; this is a loss to us as we get paid on the basis of the crop’s overall weight. Despite a decrease in acreage in 2018-19, sucrose recovery was at 10.41pc — almost a 2pc increase from Sindh’s sucrose recovery benchmark of 8.7pc. So, millers are still earning a windfall profit even with lesser acreage,” argues Nabi Bux Sathio of Sindh Chamber of Agriculture.

Official figures indicate that despite the decline in sugar cane acreage, the sucrose (sugar) recovery has been impressive. In the last two years, it has been over 10pc against the recovery benchmark of 8.7pc that makes payment of premium mandatory. But millers don’t pay the premium despite losing their appeal on quality premium in Supreme Court after two decades last year.

Published in Dawn, The Business and Finance Weekly, October 28th, 2019