Annual Review 1995
Ismail Zakaria
Distinguished Members of Pakistan Sugar Mills Association:

I heartily welcome you to this 30th Annual General meeting of the Pakistan Sugar Mills Association - Centre which, as all of us are fully aware, is
being held at the most critical time and challenging atmosphere through which our sugar industry is passing.

Indeed it goes to the credit of each one of our members to have faced unitedly and courageously the host of problems confronting our sugar industry which, at times, seemed to have crippled it and made its survival doubtful.

Without going into the detailed description of all these problems and
de­fining at length the efforts made by the PSMA in their resolution, I would suffice myself to present a brief resume of the most important issues.

Establishment of New Sugar Mills:

Despite the continuing advice of the Association for very cautious approach in this regard, two new sugar mills were established during the year under re­view, raising their total number to sixty-eight. in the country and adding to the plethora of problems of the sugar industry. This, as we all know, was done in an unplanned manner and without taking the PSMA into confidence.

Sugarcane Prices and Cost of Sugar Production:

Your Association has been emphasizing the necessity of consulting the sugar industry prior to the announcement of the sugarcane support price by the authorities concerned. The factual position, however, is that as per past practice, Government unilaterally made the highest ever increase in the sugarcane price by Rs. 2.50 per 40. kgs during the last crushing season. Again, for this crushing season, it has been further increased by Rs. 1/- per 40 kgs. Cost of sugar is naturally bound to increase due to this factor which accounts for fifty five per cent in working out the cost of sugar production. After strenuous efforts by the Asso­ciation at the Ministerial level as well as in the meetings with high officials in the Federal Government, PSMA has been able to convince them that the price of sugarcane plays the major role in determination of the cost of sugar production. With this end in view the PSMA was also able to prevail upon the Federal Gov­ernment to examine the cost of production of sugar prior to forcing the Sugar Mills to sell sugar at below cost. Consequently, the Agricultural Prices Commis­sion of the Ministry of Food & Agriculture was assigned the job of determination of the cost of production of sugar. In the initial meetings of the Agricultural Prices Commission the representatives of PSMA were also associated, of course on the insistence of the Association, who forcefully presented the PSMA's point of view, with facts and figures for working out the cost of production of sugar. Although no decision in this regard has so far been conveyed to the Association, it is hoped that its point of view would be taken into consideration by the Commission.

Sugar Production:

The sugar production was 3 million tonnes during the crushing season 1994-95 which was 0.1 million more than the previous season. By the Grace of Allah, in season 1994-95, Pakistan has exported about 285,000 metric tonnes of sugar and earned about US$ 100 million in foreign exchange for the country.

Domestic Price Increase of Sugar:

Mainly, due to the heavy increase of the price of sugarcane coupled with the high rate of mark-up and the diminishing per value of Pakistan Rupee vis-a­vis US Dollar, etc. the cost of sugar production naturally increased thereby rais­ing its price in the domestic market. This was the obvious result of all these fac­tors which were beyond the control of the sugar industry. Notwithstanding the inter-play of all these factors in the determination of the sale price of sugar in the free market regime, the Government came with a very heavy hand on the sugar mills alone, leaving aside the astronomical increases in practically all consumer items of every day use. The Government adopted coercive measures to force the sugar mills to sell their product at a price even lower than its actual cost of production. By involving the F.I.A., our Members were harassed, their sugar stocks were seized and, on some occasions, even sold at the Government-fixed price in the local market. The dealers/ stockiest of sugar were also not spared of such actions by the F.I.A. In face of such provocative and uncalled for actions of the authorities, your Association was put to the severest test of its existence. PSMA made hectic and all humanly possible efforts to defuse the situation and also to restore the confidence of our respectable Members, by approaching the Federal and Provincial authorities concerned both personally and in writing. The mills were also forced to sell 50,000 tonnes of sugar to the Utility Stores Corporation at the subsidized rate of Rs. 12.50 per kg. By the grace of Allah, PSMA was cable to normalize the situation in as much as the harassment of our Members/dealers/stockiest ceased and also their sugar stocks were de-seized. After forcefully pre­senting its view point with factual statistics, the Association is awaiting to hear about the cost of production of sugar as well as its sale price in the domestic market being worked out by the Federal Government through the Agricultural Prices Commission. We have invariably tried to keep all our Members fully informed of all developments from time to time. I must, however, plainly admit that the crisis is not yet fully over but it is hoped that Insha Allah, through the con­tinuing cooperation and support of our Members, all these problems will be re­solved.

Export of Sugar:

About 3.0 million tonnes of sugar is expected to be produced during the current crushing season 1995-96 - more or less the same quantity as was pro­duced in the last crushing season - due to good crop of sugarcane. Adding to it the last year's carry-over stock of 0.25 million tonnes, the total comes to 3.25 million tonnes, out of which home consumption is expected to be 2.7 million tonnes and 0.25 million tonnes has to be kept as buffer stock. This leaves a balance of 0.30 million tonnes of sugar available for export. Once the question of the cost of sugar production and its sale price in the domestic market is finally decided with the mutual agreement of both the Government and the manufacturers, the Association hopes to take up the matter of sugar export with the Government.

Recovery By The Banks of Working Capital Loans Advanced To The Sugar Mills And Rescission of These Orders:

Members are aware that, under the directive of the Federal Government" the State Bank of Pakistan issued instructions to all scheduled Banks to with­draw, by 31st August, 1995, the working capital loans advanced to all the Sugar Mills. This was also one of the coercive measures to force the industry to sell its product far below its production cost and suffer huge losses. This measure, to­gether with the total ban on export of sugar, would have definitely crippled the industry if it would have continued after the start of the current crushing season.

Of course through its constant and resolute efforts, the Association was able to have these unjustified instructions rescinded, which, as all of us know, was done at the level of the Economic Coordination Committee of the Federal Cabinet.

Need For Improved Varieties of Sugarcane:

I would like to bring to your attention that the Sugar Mills are hostage to the low yield and recovery as our per acre yield and recovery is extremely low as compared even to our neighbouring country India where the climatic and other conditions are almost similar to that obtaining in Pakistan. To improve the situa­tion, the Association had initiated exchange of information with the Mauritius Sugar Industry Research Institute. I now propose that the PSMA should undertake this job on behalf of all our Members and proceed with the question of cooperation with MSIRI for the cultivation of best quality sugarcane in Pakistan. I hope the Association will approve the expenditure that might have to be incurred in this regard, finalize other matters and negotiate with the MSIRI.

Protection of Environment:

We have been receiving communications from Pakistan Environmental Pro­tection Council and other concerned authorities regarding mass awareness about environmental degradation and measures to control it. PSMA has been circulat­ing such information to our Members. I suggest that for this purpose also a panel may be set up to study these issues and suggest appropriate replies so that we are not burdened with arbitrary requirements of environmental controls.

I fervently hope that all our Members will extend their fullest cooperation and support to the Association in the future as well, because it would not only be in their own interest but also in the interest of the growers, shareholders, work­ers and above all in the national interest.

I sincerely thank all of you.

05 November, 1995 ISMAIL ZAKARIA