On the morning of 23 April, a leading Sindhi newspaper carried the 'good' news that the Government of Sindh had issued NOCs for installation of six new sugar mills in the province. Another seven applications were under scrutiny. Four out of the six cleared projects will be located at Ghotki, Khangarh, Obaoro and Dehrki in upper Sindh. The remaining two at Naushero Feroze and Badin!
This disclosure is a cause for concern for those who have been watching the plight of sugar industry in the province from close quarters since long. Sindh Abadgar Board was prompt at registering its protest against this development citing reasons that are relevant in the context of maintaining an acceptable balance between the major crops grown in the province and adequate availability of irrigation water for all of them.
Contrary to this, the response of the sugar industry is muted. Pakistan Sugar Mills Association (PSMA), Sindh Zone, instead of going public on the issue by calling a press conference and registering strong dissent of the sugar industry supported with facts and figures have opted to simply write a letter to the Government followed by issuing a press statement. This is not enough.
It will be worthwhile to focus on the current state of sugar industry in Sindh and its future prospects. Until the eighties, Sindh used to contribute between 55-60% to the annual sugar production in the country through its twelve mills. Profit margins were high and sugar making was a vibrant economic activity. The number of mills has since risen to thirty-three.
However, currently the Sindh contribution hovers around 30%. Due to water shortage and unstable situation of sugarcane marketing its availability is also unstable. Sugarcane cultivation in Badin and Thatta districts, that were considered ideal for sugarcane growth due to relatively humid environment and suitable geographical location, has nose-dived. Growers there are looking for short duration and less water consuming crops.
The situation would still not have come to this pass had the dialogue between the mills and growers not been discontinued in the wake of lifting of zoning system in mid eighties and the consequent freedom to both the millers and growers to indulge in unrestricted buying and selling of cane from anywhere in the province and even Punjab.
The worsening scenario continued to receive severe jolts with indiscriminate installation of new sugar mills in the province. There were times when two new sugar mills were added in a single year. This has caused a complete chaos in sugarcane marketing. After a pause, this activity has again come alive as a bad news.
Sugarcane in Sindh is averagely grown on 242,000 hectares. The crop size during the last ten years has ranged between 183,300 to 308,800 hectares. Being a high delta crop there is no possibility of any further increase in this area which can only become available if we are prepared to sacrifice the two other major crops viz. wheat and cotton.
The prevalent uncertainty in the supply of the raw material, ever increasing cost of production, rising trust deficit between the millers and growers and the national requirement of maintaining an acceptable balance in areas for cultivation of major crops have created a situation where sugar making has become an unpredictable activity. The following statistics may be of some interest:
-- Thirty-one operational mills in the province out of thirty-three have an installed capacity of crushing 175,500 tons of sugarcane per day. Considering an average duration of the season as 135 days, the sugarcane requirement of these mills is 22,500,000 tons per season at 95% time efficiency.
-- Against this requirement, the average quantity of cane crushed during the last five seasons is 11,125,000 tons ie 49.4% of the actual need. This leaves the remaining more than 50% capacity unutilised. Season 2007-08 saw the best year when capacity utilisation touched the all time high of over 68%. This nose-dived to 45% in the subsequent year ie 2008-09. Cane availability for 2009-10 is still lower.
All stakeholders, viz. growers, millers and the Government are equally responsible for this dismal situation. By and large the growers have made no noticeable headway in productivity through yield improvement. Instead they keep pressurising the provincial government to increase the minimum price of cane every year to makeup for their inefficiencies.
Here it will not be out of place to laud efforts of a small number of progressive growers who have practically demonstrated that with little common sense and devotion sugarcane yields can be raised as high as in countries like Australia and Brazil. Millers on their part have largely failed in maintaining sustainableand direct business relations with the growers. Thus, leaving the field wide open for elements having no stake to continue to exploit both the growers and the mill owners.
Topping it all is the insensitivity of the Provincial Government to the real issues relating to the very survival of this major industry located entirely in the rural areas by deciding to indiscriminately clear new sugar mills with no justification and thus letting the confusion get worst confounded. Here it will be pertinent to cite a couple of examples to understand what is happening in sugar industry in the rest of the world.
-- Louisiana had 48 sugar mills in 1964 handling a sugarcane production of 7.8 million tons. In 2007, the number of mills has reduced to 11, which handles sugarcane production of 13.4 million tons. Although the number of mills has reduced, their average crushing capacity is 7.5 times of that of 1964.
-- In the year 1980, Australia had 33 sugar mills to handle sugarcane crop of 24 million tons. The number now has reduced to 29, but it can now handle over 40 million tons. The economies of scale and other related considerations have led them to prefer expansion of existing mills over setting up new mills.
These statistics do not invite any comment. However, one thing is abundantly clear that if sugar making is to be revived as a sustainable profit making activity that takes adequate care of the genuine expectations of all the stakeholders, then as a first step an immediate ban should be imposed on sanctioning of new sugar mills.
The six sanctions already given should be immediately withdrawn in the larger public interest. If and when a need is felt to increase the crushing capability in future it should be done through expansion rather than new sanctions as the former besides being relatively less expensive is also based on informed judgement.
(The writer is Resident Director, Matiari Sugar Mills Ltd)
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