Production 2000-2001
The year 1999-2000 having ended with crises, the prospects for the year
2000-2001 also did not look any better. With practically no carry forward
stocks and sugarcane plantation area further reduced by 5 % to 960,000
hectares, sugarcane production estimates were as low as 43.0 million tonnes.
Water supply in the rivers remained extremely low, while the drought continued
more severely in its second consecutive year.
No sooner the estimates for 2000-2001 were evident PSMA started its
efforts to curb the sugar imports which was hampering the sale of the
domestic production. Though domestic retail price dropped to just above
RS 26/- per kg. Government remained jittery on the price issue and would
not listen mainly because of its own faulty statistics and estimates.
At early stages the decision on further imports and enhancement in import
duty fell victim to PSMA production figure of 2.4 and Government's stand
on 2.1 million tonnes.
Foreseeing the production short fall 2000-2001, Government earlier discussed
and approved duty free import of 600,000 tonnes of raw sugar for refining
by the sugar mills. Since this was the first occasion to import such a
quantity of raw sugar for refining, objections rose from with in the ranks
of PSMA on the credibility of such a venture. It was assumed that it could
effect the interest of the sugarcane growers, though time has proven that
it has had a positive effect on the plantation area 2001-02.
With the production estimates at 2.4 million tonnes, supplemented by
0.55 million tonnes of refined sugar from raw, and 378.000 tonnes already
imported, Government was twice approached in Feb' 2001 and apprised of
the availability, now having reached to 3.33 million tonnes. Therefore
no further import of refined sugar would be required and hence be stopped.
In this connection a press conference was also held at the end of the
1st Extra Ordinary General Meeting on 28th Feb' 2001, at Islamabad.
Our plea did not satisfy the Government and import of refined sugar
continued with the excuse of controlling the retail prices, while during
the same season sales tax was increased by 1.5%. After convincing the
commerce Minister a ban was imposed on the import of sugar from India
which was being dumped at a subsidized price. Before the ban was imposed
413,000 tonnes of sugar was already imported, and 206,000 tonnes more
got through after the ban. This resulted in one of the highest carry forward
stock of over 620,000 tonnes at end Sept, (see graph over leaf) ever recorded,
inspite of the warnings to curb the import and avoid 1996- 97 like situations.
High stocks shown below against the years 1997-98 and 1998-99 are from
the high production, exporting years
The year 2000-2001 ended up with an availability of 3.70 million tonnes
with a consumption of about 3.06 million tonnes. Catering, for the month
of October, a surplus of over 350,000 tonnes is foreseen in November.
This will also effect the trader’s stocks of around 300,000 tonnes
held in the market that needs shedding in the month of Oct - Nov.
With such a carry forward stock, prices are likely to slip further in
the coming months with fresh buying in very limited quantities, as the
harvest approaches. So the damage already done to the sugar industry at
the cost of over spending foreign exchange worth minimum US $ 80 million,
can not be denied. Efforts are still on for the imposition of 30% import
duty on sugar, to provide protection to the sugar industry, though the
suggestion has been dropped few times at ECC. The policy negates the much
spoken free market economy, when 85% inputs of sugar manufacturing are
dictated, and the sale price is controlled by import threats with low
tariff. In its meeting of 17th Sept.’2001, the ECC withdrew the
concession of 10% duty on sugar and brought it to 20% ad val. Its effectiveness
will be observed in the coming months.
Campaign 2001-2002: -
As reported and discussed in the 3rd Extra Ordinary General Meeting
the prospects for sugarcane production are bright for the season 2001-02.
Plantation area has surprisingly improved over the last two years, while
Government target estimates were lower by 20%. Plantation area now improved
to 1,032,000 hectares with an expected improved yield could give a production
of over 48.0 million tonnes. The major supply of around 33.0 million tonnes
is expected from Punjab. Though plantation area in Sindh has slightly
improved, signs of water stress are still there on sugarcane in certain
areas.
At this situation the sugar production is estimated around or over
3.1 million tonnes, with carry forward stock of 620,000 tonnes at end
Sept. Thus availability for the year 2001-02 would be around 3.70 million
tonnes and therefore Government was advised that further import of raw
sugar would not be required.
Government’s proposal for import of raw sugar for re- export of
refined sugar was studied and it was conveyed back that at present such
a venture is economically not viable, due to furnace oil prices.
The main feature for the year 2001-02 would still be the tariff rate
on import. In case the present import duty enhanced on 17th Sept.’2001,
is insufficient and is ineffective to curb the unwanted imports, further
efforts will be made for its enhancement. The present rate of duty will
provide some protection to the sugar industry for the time being. However
the international market which is under pressure, is to be watched vigilantly.
In case there is further fall, Government is to be approached to act swiftly
to avert crises in domestic industry. The industry’s concern has
already been communicated to the Federal Government.
Domestic consumption
Various estimates have been in use in the past to ascertain and forecast
domestic consumption. Thumb rule formula based on population and per capita
consumption is the one most commonly used, which is a wild guess, as the
population and per capita consumption have both been growing simultaneously
with no reliable data available. The available data at PSMA Centre shows
that based on survey conducted for four years, during 1987-88, per capita
consumption of refined sugar for 1987-88 was estimated at 10.7 kg with
an increase of 4.72 % per year. Thus per capita consumption for 1990-91
was projected at 12.29, but actual increase was much higher, because of
the increasing demand in the manufacture of soft drinks, confectioneries
and bakery products. Large availability factor and urbanization has also
contributed to the increase in demand of refined sugar in comparison to
the use of gur.
At present 21- 22 kg is being used as per capita consumption, but the
second and major factor of population remains uncertain to arrive at a
consumption figure. Such estimates have been creating growing controversies
in planning imports and exports.
In a recent study, by adding up the monthly sales and imports, including
unrecorded imports of raw sugar, annual consumption and availability for
ten years has been worked out precisely. This data, when projected gives
a pretty close consumption forecast as tabulated and drawn below for the
sugar years (Oct- Sept).
The projected graph indicates 2.90 % annual increase in the past ten
years. The total consumption records around 80,000 tonnes increase per
year on average in the recent past, that would need regular monitoring
for alteration to provide a fair indicator.
The data also proves that the estimated per month consumption given
to the Government for 2000-01 as 260,000 tonnes was on target. The actual
supply
Oct-Sept. ended with an average of 254,000 tonnes due to low lifting and
excessive supply.
Global Sugar Scenario: -
World sugar production initially indicated a small deficit in the year
2001-02, but not enough to have any significant effect on the world sugar
prices. Current reports suggests world sugar production as balanced with
the consumption, due to positive boost to next year’s crop in many
countries. Balance of end stock of 30.0 million tonnes will continue to
dominate the depressed prices.
The key to 2001-02 production will be the extent to which Brazil's production
had recovered after last year's drought. They went through largest sugar
crisis three years back due to excess supply. At totally deregulated market
and abandonment by the Government it faced losses of over U.S. $ 3.0 billion.
As a result producers reduced plantation area, deactivated uneconomical
areas, reduced investments, promoted discounts etc. The crisis became
worst when the International sugar price fell below U.S. $ 150/- in 1999.
Even with such an abased price, Brazil exported its 11.0 million tonnes
in 1999. Their crisis brought hard and bitter lessons to Brazil and other
sugar producing countries. Brazil produces the cheapest sugarcane, sugar
and alcohol in the world. The domestic economic situation in Brazil, with
continued devaluation is playing a great part on the International sugar
prices, effecting directly the countries like ours with high production
cost. Even U.S. sugar industry fears destruction by Brazilian imports
if restrictions were removed. Now it accuses Brazil for, right from subsidies
to the use of child labour etc.
India’s sugar production 2001-02 is likely to be the same as in
the current year i.e. about 18.3 million tonnes, while the country already
has a surplus stock of 11.0 -12.0 million tonnes. Unable to export its
desired surplus quantity, it now aims to raise the ban, to produce and
export raw sugar in future. At present producing mostly low grade 150
ICUMSA white sugar, several Mills aim to diversify their sugar product
to 45 ICUMSA refined sugar and raw sugar for export purpose. It could
export more of its refined sugar into International markets only, if the
prices were US$ 250 /- and above to match its production cost.
European Union pessimistic reports for the forthcoming harvest sugar
production is estimated at 15.1 million tonnes, down from 16.7 million
tonnes. European Union panel for sugar management very carefully ascertains
the production and monitors export quota with heavy export refunds for
its surplus production. In July last the subsidy recorded was as high
as 386/- Euros per tonne. A maximum export rebate of Euros 455/- is forecast
for October export tenders.
Next year Thai crop is predicated to be higher by 10 percent promising
a production of about 5.50 million tonnes.
China is expecting a sugar production of 7.2 - 7.5 million tonnes, considerably
higher from the current year’s 6.20 million tonnes. The production
is still insufficient to meet its domestic needs. With surprisingly low
per capita consumption of 8 Kg, a sizeable part is consumed by the soft
drink industry. Chinese have been switching their sweetener choice from
granulated sugar to artificial sugar. Accepting the use of illegal artificial
sweetener could harm Chinese Government's standing with respect to WTO
accession, which as expected may increase its per capita consumption higher.
During the last four seasons International prices shown hereunder remained
depressed due to high stocks. Many of the large importers had imposed
protective barriers in order to shield their own producers from extreme
low market prices. Un stable price attitude is observed due to the stock
build- ups.
Effects of WTO regime and Globalization: -
In the past couple of years anti globalization protestors have not missed
any venue for a major economic meet. The flaw is severely felt by the
bulk of the third world. Developed countries are pursuing reprehensive
trade practices in a manner where on the one hand, they are establishing
their regional free market zones, and on the other hand asking comparatively
weaker developing countries to open their gates without any restriction
for imports and services from the developed countries. This could end
up with developing countries being treated as main suppliers of the cheap
raw material and importer of manufactured goods.
Recent news that SAARC will take a joint stand on the Ministerial level,
and the fact that Government of Pakistan, has set up nine committees to
study WTO regime, to identify adversely effected items in the new trade
order, is received with appreciation by this Association. We hope the
sensitivity of the sugar industry is well under-stood by the Government
and it is included in the items that need protection. Our industry being
agro-based industry is the most vulnerable even now.
Events of the Year : -
• As the situation demanded three Extra Ordinary General Meetings
were held.
• As many as thirteen meetings were held during the year with the
Government of Pakistan at Federal Minister's level to apprise them of
sugar situation and problems faced by the sugar industry.
• During March 2000, on Minister for Industry's call a meeting
was held at SMEDA Lahore, where after discussing problems of the sugar
industry a proposal was moved by Mr. Razzak Dawood of the long awaited
demand of PSMA for "Long Term Vision" based on the mechanism
for improvement in yield and recovery, as sugar "Productivity Enhancement
Programme". PSMA submitted its proposal to the Expert Advisory Cell
appointed by the Ministry of Industry.
Subsequent meetings were held in this connection and the draft proposal
was discussed. Special on site meetings, of the Minister for Industry
and Minister for Food and Agriculture were arranged in Sindh and Punjab
Zones, in an effort to introduce and discuss the programme with growers.
Pivotal point of the proposal was to establish "development zones"
with the sugar mills as model farming areas with incentives to the farmers
and the millers. The workability of the proposal is still not finalized
and after the last meeting in May' 2001, further progress is not known.
• In May 2000 and later in June 2000 a strong move was made, by
the MINFAL with an expression that the sugarcane act needs be fully revised,
as the Act in its present form is obsolete. Millers and growers were called
to these meetings, but after active and objective discussions the move
fizzled out without any result and future reference.
• MINFAL after having run a trial farm of sugar beet in Sindh tried
to propagate for sugar beet plantation to replace sugarcane on the basis
of its low irrigation water demand. While such trials are to be carried
for atleast three years, the Millers were not taken into confidence for
conversion and additional equipment to handle beet slicing. Moreover it
was known that in NWFP the beet slicing starts at the end of sugarcane
crushing, whereas its maturity in Sindh would be over lapping the cane
crushing. PSMA did not attend the presentation at MINFAL.
• After approval of the Central Executive Committee, the case for
increase in the rate of annual subscription and sharing of PSMA Centre
with Zones, was put up to the General Body at the 3rd Extra Ordinary General
Meeting held at Lahore on 11th August 2001 and was approved unanimously.
Thus item 5(a) & 5(b) of the Article of Association stand amended.
• Hon. Minister for Commerce and Industry joined us at the 3rd
Extra Ordinary General Meeting in Lahore, where beside discussions on
different aspects of the sugar industry, Mr. Razzak Dawood asked for PSMA's
comments on the Support Price for sugarcane. He informed the members that
proposal for enhancement of sugarcane support price is on the anvil, while
a general support exists for the free market mechanism. He also informed
the members that instead of support price a system of " Indicative
price" is also under consideration. He asked the members to convey
to him their comments after detail discussion at zonal level. Later ECC
in its meeting held on 17th Sept. enhanced the sugarcane price to Rs.
42 / 43 as indicative price.
The sugar industry is faced with the persistent attitude that lacks
objective approach on sensitive matters. Factual figures are ignored during
policy making where a consistent laid down sugar policy workable during
the years of short fall and abundance is needed. We are optimistic that
better and proper attention will be given to the sugar industry based
on its merits.
To conclude, I would like to thank the Zonal Chairmen, Central and Zonal
Executives Committees, all members of PSMA and the secretariat of PSMA
offices for their co-operation and support. |
