Annual Review 1992
Senator Syed Abbas Shah
Dear Members:

It gives me great pleasure to present you 27th Annual Report of the Pakistan Sugar Mills Association while the Present Executive Committee has completed its two year tenure.

First of all let me thank you all who are here to participate in this meeting and then our patrons for this meeting the PSMA Punjab Zone who have kindly arranged this meeting be held here at their new premises, who also deserve our sincere congratulation for owning their own graceful office.
During this year three mills have joined our Association whom I welcome heartily. Two of these Sugar Mills were in production Ansari Sugar Mills and Phalia Sugar Mills who have done well during 1991-92 season and they have put in a production of 83,500 tonnes jointly. Third Sugar Mill that came into the fold of the Association is Shiekhoo sugar Mills who were still under installation during 1991-92 season, and will soon be having trial production whom we wish every success.

According to our information some more Sugar Mills will be operational during 1992-93 season. One of those is Chanar Sugar Mills in Faisalabad who have kindly conveyed us with their starting date as middle of October 92. I am confident that these non-member mills will soon join the Association and strengthen it for joint stand and policies.

Review 1991- 92 (Production)

It was for the second consecutive year that production record has exceeded even the optimistic assumption. The production of sugar in the country has touched a new record during 1991 - 92 season. There has been an overall increase in

Cane crushing 10.12%
Sugar production 20.92%
Recovery 9.86%

over the year 1990 - 91. The total production of 1991 - 92 was 2,326,000 tones as compared to the previous year's 1,932,000 tones which is a matter of very healthy trend and gratitude. It is a happy observation to see improvement in overall availability of cane crop (with exception of Punjab) and better recovery. Similarly the production of sugar beet in NWFP has also shown its share of improvement. Beet is produced only in the areas of Peshawar and Mardan valley, and is used by three Sugar Mills in operation in this area. It is generally about 50 days operation from Mid May to Mid July. The production of beet sugar and recovery has also followed the pattern of cane sugar and accomplished 24% increase in sugar production and 6.84 % improvement in the rate of recovery.

There has been no noticeable improvement in the country for the yield per hectare of cane crop. The improvement in the rate of recovery was for multiple favourable reasons, and one of it is planned crushing period for which all members were requested to follow it in 1992 - 93 season. as well. To have broad spectrum I invite your attention to the Table attached, which indicates the rate of growth in past twelve years in a glance.

Year No of Mills Cane Crushed (Tonnes) Sugar Made (Tonnes) Recovery (%)
1980-81 34 9,143,842 821,357 8.98
1981-82 35 14,591,482 1,268,334 8.69
1982-83 36 12,511,427 1,110,575 8.87
1983-84 39 13,489,213 1,133,643 8.40
1984-85 39 14,692,507 1,304,972 8.88
1985-86 40 12,063,292 1,102,316 9.14
1986-87 41 14,485,439 1,255,839 8.67
1987-88 44 20,304,087 1,743,505 8.59
1988-89 45 21,707,520 1,817,935 8.37
1989-90 48 20,501,339 1,828,904 8.92
1990-91 51 22,603,696 1,908,838 8.44
1991-92 52 24,795,815 2,296,698 9.25
Zonal Review 1991 - 92 (Production)

Production on Punjab Zone has shown remarkable increase in the production of sugar and the rate of recovery. Rate of increase in this department was 8.41 % and 11 .66%

Cane crushing in Punjab was 11,745,525 tonnes against 12,094,630 tonnes in 1990 - 91, which means a fall of 2.55 %. The industry recovered it self by the Single Factor i.e. rate of recovery. While it is gratifying and creditable to the industry, it is also an alarming situation to note the regular decline in the cultivation and production of the cane crop. Unless immediate and concrete steps are not taken to improve the cultivation and improvement of sugarcane crop, with the commissioning of new mills the situation in some areas of Punjab will not be viably economical for the running mills who are already facing difficulties.
Sindh Zone contribution has been very high during 1991-92 season
It created a new record and laid a foundation offering new challenge to the Industry and other concerned associated with it. Sindh Zone alone produced 1,187,570 tonnes of sugar which itself is 51 % of the total production of the country. There has been a remarkable achievement and increase in,

Cane Crushing 24.6%
Sugar Production 31.6%
Rate of Recovery 5.74%

There is still room for exploitation and improvement if the potentials are
utilized and directed with prudence.­
Production in NWFP also did not lack behind. Mills in NWFP have shown improvement in,

Cane Crushing 20%
Sugar Production 33%
Rate of Recovery 10.76%

In a way the results are more favourable. Production though small as compared to other Zones with inclusion of beet sugar was 125,834 Tonnes, which has shown an overall increase of 30.92 %.

It is gratifying to see that the industry in the country inspite of several restrains and hurdles has struggled towards improvement.

Improvement in Technology by Assistance of UNIDO and WAPDA

After 05-09-May 91, Workshop on the Asian Sugar Cane Industry with emphasis on diversification, PSMA has been in constant touch with United Nation Industrial Development Organization (UNIDO)'s based in Islamabad. UNIDO's offer for expertise visits to Sugar Mills that wished to have UNIDO assistance for improving efficiency was discussed number of times till a programme was agreed that a seminar on art in ethanol manufacturing, energy management, anti pollution measures including effluent treatment will be arranged and a diagnostic visit to atleast eight Sugar Mills for efficiency improvement etc. will follow.

For this purpose PSMA arranged a formal request from Government of Pakistan to UNIDO, to enable UNIDO Vienna approve a project worth $ 141,000 for input on behalf of UNIDO.

Arrangements are nearly completed to have the seminar is Serena Hotel Faisalabad around first week of January 93 and diagnostic experts visits to follow.

The scope of the project will- be implemented Jointly to transfer of know­ how, management skills and healthy changes in overall efficiency and productivity.

Similarly WAPDA through their USAID Resident Adviser Mr. Robert E. Grimshaw and members of Executive Committee have done their best, for members to avail the opportunity of study tour to Hawaii, which can provide useful experience that can help plan expansion of Sugar Mills and gear them to produce extra electricity and sell to national grid system.

The proposal is now matured and some members have agreed to join the study tour likely to take place in March 93.

Review of PSMA (Centre) Performance:

This meeting gives us opportunity to revaluate our performance and gaps that are to be bridged in light of future happenings and growth.

The Central Executive Committee with its multiple objective has put in its best endeavour in identifying the problems faced by the industry and provided 'feed back to the Federal Government at various occasions and at different levels.

The PSMA Centre's new Office is now fully established, and in fact concerned Federal Departments remain in regular touch and take benefit of this establishment.

We have been regularly in process of appraising Federal Ministers at different forums on matters concerning the industry and have been getting positive and enthusiastic response from them. Our approach has been logical and based on experience, the results of which though positive but not instantaneous.

PSMA did not miss any occasion in lodging its concern to Government functionaries, wherever any discriminatory action is cropped up resulting to any loss to the Industry.

PSMA has been able to engage Federal Finance, Industries, and Commerce Ministers, Chairman Senate to PSMA and PSST functions regularly, which gave them a chance for direct appraisals. As a result it is now clearly understood that this agro based labour oriented industry is one of the major revenue source for the country, and therefore the plea put in by the industry gets dew consideration.

The recent directive by the Prime Minister for composition of Technical Assistance Evaluation and Review Committee for the study of Sugar Industry is a favourable step.

This high level committee has been formed to develop a long term policy for Sugar Industry with reference to recovery of sucrose, area under cultivation of cane crop, and possibility of export. In general term we can call this an achievement of PSMA's efforts that we have been working hard since long time. We have promptly reacted to this directive and have asked for bigger participation of the members from Sugar Industry. It is hoped that some long term policy would be accomplished and Sugar Industry will get rid of the inconsistency in the policy which has been haunting us for the past few years. For the time being it is an exciting change to see that instead of studying import of sugar, due consideration is on its wings for the export possibilities, for which necessary potential is there provided objectives are supported by
re-modelled incentives on long term basis.


1. Sugar Cost Price Disparity
Mill-gate support price has been in constant increase for the past five years within average increase of about 13% annually but corresponding increase in the selling price of sugar has not taken place.

It was hoped that there will be no increase in the support price for 1992-93, but surprisingly while the sugarcane crushing has already started in Sindh, sudden increase of 75 paisa per 40 Kg. was decided and announced on 18th October. With such increase what does the country expect. Can the sugar Industry even try to keep the price of the sugar low or Government will ignore the dump quantity of the sugar in -the mills and find another excuse to import sugar.

2. Working Capital Constrants
The Sugar Industry is seasonal by production spell, while sugar is consumed evenly throughout the year. A recent policy to curb working capital loaning would delay in payment to sugarcane growers and could have negative effects over an already delicate economic equilibrium of the economy, particularly to wholly Agro-based sugar Industry.

3. Turn Over Tax.

This new tax is payable by the new industrial units, having no taxable profits. This is a reverse turn from the Government's policy to encourage industrial growth in the country, specially in the rural areas. Industries in the rural areas are given incentive of the tax holiday of various durations depending on location. New industries which run in to tax losses due to initial depreciation allowance are entitled to income tax exemption. Turn over tax negates the basic concept of industrialization, specially the rural areas.

4. Mark-up on sugarcane Crop Loan.

Credits for sugarcane crops are treated in absolute discrimination with all other crops as treated by the Banks/Lending Institutions as commercial on flimsy grounds that such loans are to be guaranteed for recovery by the sugar mills. This arrangement which was meant to insure loans recoveries has changed the character of the credits. Such loans should have been treated as agriculture loans because the purpose is crop's promotion. We support the provision of loans for the sugarcane crop growers at concessional rates as been done for the other crops, and after dezoning loan guarantees by the sugar mills are no more feasible.

5. Full Crushing Season
The period of sugar cane crushing, known as season or campaign, depends upon volume of sugarcane available vis-a-vis aggregate, crushing capacity held by the industry at a given point of time. Both these features are variable and not determinable in advance.

Size of sugarcane crop could be higher, depending on several uncertain factors. It could vary from year to year. Conversely, the crushing capacity would be higher each year in succession. By interaction of the two, the crushing season would normally get reduced year after year, unless crop size exceeds the growth in crushing capacity at a given time.

The two basic elements in determination of a crushing season further depend on the following additional variable features.

i) Size of sugar cane crop and the
ii) Quality of the crop.

Area under the crop would vary, depending upon seasonal returns from several competing crops. Quality of the crop depends upon soil and climatic conditions, inputs including water supply, and the human care factor. With host of unpredictable number of days to qualify as a "full crushing season" in not judicious.
Crushing capacity of the sugar industry is bound to increase with time. The increase takes place due to the following reasons:

iii) Horizontal expansion, through emergence of new factories.
iv) Vertical expansion, by balancing, modernization, replacement (of process), extension (addition of tandem) etc.
These are regular pursuits for ensuring economic viability. The sugar being a process industry, expansion in the capacity has been found to be imperative.
6. Import Policy On Sugar

Throughout the year the availability of sugar has remained comfortable. The performance of the industry during the year as discussed earlier left no doubt that production is capable of meeting national needs of the sugar. It was ordeal to see import of sugar during the peak production period and later import of 36,000 tonnes more during the end of crushing season when stocks at Sugar Mills were showing 400,000 tonnes in balance. The total consumption of the country was estimated at about 2.4 million tonnes, and whereas the production was so close to the requirement such imports were not justified. PSMA has invariably been expressing its doubt over the objectivity of such decisions, and received assurances at different levels that local industry's interest will not be jeopardized. The concerned Ministries have been asked to consider ban on import of sugar and save annually foreign exchange worth of $ 36.0 million that has be spent during 1991-92 season.

During this season about 117.000 tonnes of sugar was imported at the cost of Rupees equivalent of about 915.0 million. I am sure today at this moment when new crushing season has already started stocks held by the Sugar Mills alone is more than the sugar imported.

Unplanned and untimely Sugar Imports have created intricate problems for the National Sugar Industry. It is earnestly hoped that with some more efforts object will be accomplished and a wisely and timely decision of ban on import of sugar will come through.

The PSMA have represented these cases vigorously and hopes the government would consider and rescind the decisions. With our Islamabad office now established and spade work done, the sugar Industry is looked upon with better understanding. I think we still need to do a lot, because when we look at our achievements, we find that on problems we just discussed, Government functionaries were not justified and considerate.

Islamabad centre office needs more, proper and in time feed back. Our members need to co-operate more promptly and keep in touch with Zonal and Centre offices. PSMA centre office even sometimes faces problems on ordinary returns and statements due to lack of response. It is earnestly hoped that this gap will by your co-operation close steadily to strengthen the association.


Senator Syed Abbas Shah