Iskander Khan is the present and third-time Chairman of the Pakistan Sugar Mills Association (PSMA). He is also the Director of the Premier Group of Companies.
When BR Research interviewed Khan last year, it was in his capacity as Chairman PSMA. This time around, however, Khan spoke simply as an entrepreneur with an idea; his goal is to reduce the unnecessary wastage of flour and benefit the common man. Below is his vision.
Amid all the macro-level talks of support pricing, fertiliser off take yields and seed variety, there's a much simpler issue that escapes our attention when it comes to the wheat flour industry. This is the issue of flour wastage in the supply chain as a result of 'dusting.' The problem lies in the coarse, polypropylene sacks that are used for flour packaging. These sacks, being coarse and porous and incorporating recycled polypropylene waste, fail to contain all the flour and result in wastage.
"We came to the conclusion that 3 to 5 percent flour goes out of the bag because of dusting: you throw it on to the truck, it goes from the mill to wholesaler, from the wholesaler to the retailer, and from the retailer to your home. It results in significant losses."
Although 3-5 percent does not seem like a lot, it certainly adds up to a significant number. Assuming a wastage of 3 percent of all the flour produced in the country, the total loss amounts to Rs20 billion; at 5 percent, it's Rs35 billion. Apparently, the Pakistan Standards & Quality Control Authority (PSQCA) puts the same statistic at two percent, but Khan claims that it's actually more. In any case, it's a lot of money that is being lost unnecessarily. The solution described is simple yet effective: lamination of the bags.
"I got the idea from flour sacks exported to Afghanistan. I had no idea this much wheat flour was being wasted. Then I had a survey conducted; in January 2014, we started producing these bags and made a presentation to Ministry of Food in March 2014. Since then, the people of our beloved country have lost over Rs70 billion of wheat flour."
Lamination of one side (not both, because the flour needs to breathe) will solve the wastage issue, for a nominal increase in cost. In addition, the printing on woven surfaces is never good, whereas on a laminated bag, it's smooth and allows for more colours as well. However, wheat flour at the chakki is packed in both-side laminated sacks; the Ashrafi brand has started using these sacks.
But still, there are other issues with the current sacks in use that need to be addressed. The large sacks used for packaging wheat, rice, sugar, and flour are all made from polypropylene, which is biodegradable. This means that it decomposes under the sun, and can be recycled. However, every time a recycled material is incorporated into a new bag, it becomes non-food grade (used in packaging fertiliser or chemicals). This means it loses strength and becomes more vulnerable to biodegradation.
"Polypropylene degrades in the sun. That's why food items are never stored in sunlight; they're always stored in godowns. But when you put in recycled material, it degrades in shade. For food grade bags, you cannot use recycled material."
Moreover, the non-food grade bags are generally weaker and tear more easily. But, because using recycled material saves money and props up margins, who can blame the producers for opting for this option?
"Flour mills buy their sacks from whoever gives it cheap. The price of flour already incorporates the cost of the bag. Just to save his own money, he uses recycled material."
With all this in mind, Khan set out to get a notification passed that would make mandatory not only the lamination of one side of the flour bags, but also that they be free of contamination:
"I went to PSQCA. They are good people, but they are suppressed. We made our presentation, and they agreed for the notification for mandatory use of one-side laminated polypropylene sacks for flour packaging."
However, as one would have guessed, the matter was never that simple. The issue has been marred by redundant bureaucratic red tape. After the notification was sent by PSQCA, it had to pass through all the ministries because that's the law; before you can gazette it, you need to get consent from all ministries, related or not: Ministry of Environment, Industries, Commerce, Science and Technology, etc. The ironic part is that all the ministries gave consent, and only the Ministry of Food Security and Agriculture is left! And because of it, the notification is still pending.
"I went to the Ministry of Food Security and Agriculture. I told them this bag costs Rs3 more; the packaging cost will increase by Rs2 billion, but you're going to save Rs25 billion per annum. Sikander Hayat Bosan was very positive. But now it's been over three years and the matter is still stuck. This is criminal negligence. They just don't care."
Nevertheless, the Premier Group, which has a formidable presence in sugar and started manufacturing its own polypropylene sacks for sugar as well as cement, is producing the laminated bags. The company has one of the largest polypropylene finished-goods plants in the world today. The bags it makes are Rs3 more expensive, but the benefit is to the average consumer. However, the demand for these bags thus far has been tepid at best:
"Some flour mills have started buying from us. But right now, there are 20 factories that have lamination machines and can cater for 630 million polypropylene sacks for wheat flour packaging."
The best part is that there is no barrier to entry, no patent or proprietorship. Khan says that the whole point is that the technology is cheaply and readily available:
"Anybody can make it. You just need a lamination machine. It's cheap; costs around Rs4-6 million. There isn't any sophisticated process that would restrict it to one segment."
If indeed this notification is passed and becomes law, there will be significant savings to the country. One potential source of concern, however, is whether the flour mills will start passing the higher price of the sacks to the public. To that, Khan responds that the flour mills are already overcharging for the sack, buying for Rs6 and pricing it at Rs12.
"I'm a visionary and when something is wrong, I go out of my way to fix it. This isn't my job! It's the government's job; they're supposed to do this. Still, they're making me run around."
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