It gives me great pleasure to welcome you to the 31st Annual General
Meeting of PSMA which, as you are aware, is being held at the most critical
juncture and challenging atmosphere through which the sugar industry is
passing. The factual position and the problems of the industry will be
first focused, followed by suggestions, both long-term and short-term.
As is known to you, the year 1995-96 under review was in sharp contrast
to the previous two years, 1993-94 and 1994-95, during which sugar production
was close to 3 million tonnes, resulting in export of 122,000 tonnes and
316,000 tonnes respectively. During the outgoing year, the production
dropped by hefty 20 percent from 3.0 Million to 2.4 million tonnes, thereby
necessitating imports of 0.4/0.5 million tonnes from India and other countries
involving substantial foreign exchange outlay.
There is a wide range of factors responsible for the hiccup, some of which
could have been averted. The year initiated with two untoward measures
namely FIA action against sugar mills and credit squeeze which sent wrong
signals to sugarcane farmers. Anticipating crisis in sugar industry, the
farmers switched to cotton, paying better return to them for which strenuous
efforts were made at different levels to augment its production, more
particularly through "open" Cotton Policy. The area as well
as production of sugarcane shrank by 5% and 4% respectively to 963,000
hectares and 45.2 million tonnes during the year over the previous year.
More significantly, sugarcane crushing fell sharply by 18 percent to 28.2
Sugarcane crushing on Pakistan basis dropped by 17.7% at 28.152 million
tonnes as against 34.193 million tonnes during the preceding season 1994-95.
Total sugar production decreased by 17.9% to 2.450 million tonnes in 1995-96
as compared to preceding year's production of 2.988 million tonnes.
Sugarcane crushing in Punjab came down by 19.6% to 16.883 million tonnes
from 20.993 million tonnes in the previous year 1995-96. Sucrose percentage
also dropped from 8.49% to 8.12%, cumulative result being decline in sugar
production by 22.3% to 1.376 million tonnes against 1.772 million tonnes
produced in 1994-95 season. Pakistan Sugar Mills Association
In Sindh sugarcane crushing fell down from 12.038 million tonnes in preceding
year to 10.341 million tonnes in 1995-96. However, there was some improvement
in recovery from 9.2% to 9.75%. The production declined to 1.008 million
tonnes sugar as against 1.108 million tonnes in 1994-95.
NWFP suffered serious set-back as its production fell down by 63% to
65, 682 tonnes as against preceding year's sugar production of 104, 136
The fall in sugar production sent alarm signal for the economy. On the
one hand, the industry's capacity has reached a level of over 5 million
tonnes or double the current level of sugar output. This obviously had
an implication for the under-utilization of the existing capacity which
pushes up the per unit cost of production. On the other hand, Government,
becoming alarmed by rising sugar price, started arrangement for sale through
Utility Stores Corporation for which the industry offered 200,000 tonnes
on below cost basis as under:
Ramzan Supplies 30,000 tonnes
After Ramzan 170,000 tonnes
Supplies Total 200,000 tonnes
Subsequently the heavy rush at the Utility Stores, resulting in long
queues and running out of stock, purchase of goods worth Rs. 100 to be
eligible to buy sugar and lately introduction of Price Club Card, all
cumulatively, failed to achieve the desired result of providing relief
to low-income consumers.
Sugar industry is beset with escalating cost of production. The Government
enhanced sugarcane supply price for 1995-96 by Rs. 1 to Rs. 21.75 per
40 Kgs for Sindh Zone and Rs. 21.50 for Punjab and NWFP Zones. During
the year under review, sugarcane suppliers started demanding price of
sugarcane much higher than the support price. To pressurize mills, sugarcane
supplies were either completely stopped to curtailed to a large extent.
This situation further aggravated mills' position as they were not in
a position to recovery even the season's variable cost. Eventually, the
mills had no choice but to yield to the pressure of the growers and had
to pay substantially additional price of sugarcane over and above the
price fixed by the Government. Low volume of production, coupled with
increased price of sugarcane, made the situation worse for the industry.
Yet another hefty support price increase by Rs. 2.75 per 40 Kgs was announced
early in August 1996 for the current season. This 13 percent hike has
pushed the support price to Rs. 24.50 for Sindh and 24.25 for Punjab and
NWFP Zones. The purchase price will be higher if quality premium is included.
The rise in electricity and fuel charges and mark-up rates, coupled with
creeping devaluation of Rupee, has further compounded the problem. The
general price rise as well as wage spiral will naturally result in higher
production cost of sugar. It must be pointed out here that in spite of
higher production cost, prices of sugar have risen at a slower rate than
those of other consumer goods. a fact which is often overlooked.
The objective and concern of the Government to check sugar price increase
can be achieved through rise in sugarcane production. Its short supply
increases production cost of each mill as low volume is not able to absorb
high fixed cost and economies of scale. Rise in sugarcane availability,
through increase in yield per hectare [presently 47 tonnes] and sucrose
recovery [presently 8.7%], remains crucial to the existence of sugar industry.
This will result not only in higher income to growers but also in enhanced
cane availability to the industry, greater sugar production, lower cost
of production per unit as well as higher revenues to the Government. It
should be noted here that yield as well as sucrose recovery are lower
in our Sindh and Punjab compared to neighbouring provinces of Gujrat and
Punjab in India, respectively, by a sizeable margin, although climatic
and other features remain the same.
Aside from enormous challenges, the outgoing year also provided an opportunity
to have a deeper insight into the twin problems of low sugarcane yield
and sucrose recovery. As a result, Resource Group and Task Force were
formed which have submitted their recommendations. These have addressed
to the relevant issues and suggested remedies to augment low yield and
recovery. The importance of Research and Development has been highlighted
for evolving new and improved varieties of sugarcane in order to raise
the yield and recovery. PSMA has succeeded through its communications
with the relevant Government agencies in convincing them for the urgent
need of R & D in sugarcane cultivation. In this connection, various
meetings have been held between PSMA and relevant authorities. You will
be happy to know that measures for implementation of the recommendations
are underway and it is hoped that this year will witness concrete steps
initiated in this direction. The initiative taken by policy-makers in
realizing the urgency and importance of raising sugarcane production is
worth appreciating. The industry will lend full support and cooperation
in the gigantic task in all possible ways.
A comparative analysis of sugarcane yield and recovery between India
and Pakistan reveals that we are lagging behind in both. The following
table shows a comparison of yield and recovery of Indian Punjab with Pakistani
Punjab and Indian Gujrat with Sindh:-