Navigating facts in the post-truth world is becoming increasingly challenging; and more so in areas where data can be taken to mean anything based on its representation.
Take sugar milling sector for instance; on one hand, annual production numbers published by the industry association over the past 3-4 years has adopted one overarching narrative: that support price has eroded industry’s profitability; and that every year more mills face closure or are operating well-below installed capacity levels as total supply exceeds domestic demand by almost one-fourths; and that sector cannot be export competitive without subsidy.
Financials published by listed entities mostly corroborates this narrative; sugar milling division of most listed firms has indeed performed poorly for at least past three years, with the differential between global and domestic sugar prices serving as additional proof of industry dynamics gone awry, blamed largely on short-sighted regulatory policies.
At the same time, tales of “sugar barons”, protected by politicians, also remain a popular media polemic that resonates with the larger public. Wherein lies the truth? Calculations made by BR Research confirm industry position that mills cannot remain profitable in long term if the artificial floor on sugarcane price remains in place in the form of support price mechanism.
Yet, if politicians run the industry, why would they purposefully retain a pricing mechanism for industry raw material that obviously harms their business interests? More importantly, if the sugar mills, by and large, indeed procure sugarcane at government indicated prices, as reflected by losses recorded by their sugar divisions year after year, why have new mills continued to be incorporated at a time of sectoral decline?
Pakistan has not recorded any significant shortage of domestic sugar supply at least since 2013; yet if SECP incorporation data is any guide, at least 22 new mills have been registered with the regulator since that year. One could assume that a fraction of the newly registered mills may reflect companies applying for change of name or represent a merger between existing mills. Yet this appears not to be the case.
Whether these are new mills or existing mills renamed, at least half of the mills registered since 2008 do not show up in the annual report published by the industry association, PSMA. Does that simply mean that new mills have not applied for membership of PSMA? Or, are new mills being incorporated every year but choose not to commence operations?
Where ever the truth may lie, the discovery raises questions about the credibility of country’s total output figures published by the industry association, which by the way remain in line with Large Scale Manufacturing figures published by PBS. Moreover, if production by the non-member new mills is being consumed domestically, it indicates that actual domestic demand exceeds the 5.5 million tons average peddled by the industry leaders.
If the industry association expects support of its position by independent researchers, it has some reckoning to do.
Comments
Comments are closed.