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Salvaging steps

Keeping this in focus, PSMA-SZ took several steps in salvaging the situation from shaping into a compounded distress.

Keeping in view the odds emerging on closure of a sugar mills and its serious socio-economic implications on the rural economy, the PSMA-Sindh Zone took initiative well in time to apprise the leading bankers and representatives of the development financial institutions about the adverse trends prevailing in the sugar industry. The PSMA delegation called on the Governor, State Bank of Pakistan in this regard.

Soon, under the aegis of the SBP, the PSMA gave a presentation to the bankers and DFIs representatives about the trends and typical problems blocking flourish of the sugar industry. This helped to bring the message home. The PSMA-SZ remained in touch with the on-going process of restructuring the sick units for their revival, sugar subsector being the part of it. It is gratifying to note that the efforts proved useful by its positive outcome to a great extent.

Keeping the unexpected hardships faced by the sugar industry, arising during the review year, due primarily to a very short sugarcane crop, together with poor quality, the PSMA-SZ preferred keep its contacts on line and all along with the federal ministries of industries, commerce, agriculture and finance. This has immensely helped in creating conducive climate, cementing confidence and promoting understanding. This interaction needs to be frequent so that the sugar industry's view point can be presented in more orderly form, by combining informal and formal channels, so as to serve the greater good.

Sugar industry's significance in the national economy has not been realistically assessed and understood. Sugar industry is an exceptional catalyst of the rural development and an engine of its dynamic growth. Social contribution of the sugar industry has never been visualised, lest be accounted for. A subdued operating performance notwithstanding during the review year, sugar industry's contribution to the gross domestic product by sugar alone was about Rs. 51 billion, including in it the value-addition of about Rs. 21 billion. More than Rs. 30 billion have directly flown to the farm sector on supply of sugarcane.

Inaccurate estimates of higher sugarcane crop for the review year, followed by the growers' strong demand for early commencement of the crushing campaign created a lot of ripples. Some units, unable to resist the pressure, went on stream during October. Later, the correct report of depleted sugarcane volume rendered situation for the entire sugar industry exceptionally adverse. Choice between burning of costly furnace oil or pegging sugarcane prices became a dilemma, throwing sugar cost economy haywire. The season, to say the least, turned the worst, grinding the sugar industry by production cost push on the one end and sugar price pull during the crushing spell on the other. This has been the tendency persisting for the past long time. The strategy of financing seasonal stint of mere four/five months contrasted by sales of sugar spread over a year and above in the surplus situation, is a typical and critical issue. Not properly addressed and adequately resolved, it is bound to repeat its adverse influence on the sugar economy.

Timely start

There is no point in start up of the operations during October in Sindh and November in the Punjab and NWFP. Mid-November in Sindh and early December in the Punjab and NWFP zones is a suitable timeframe, for streamlining supplies and getting average one percent higher recovery. It indeed means a lot. One percent additional recovery on the national average of 8.52% (being average of the past five seasons) would make it 9.52%, that would increase sugar production volume by 11.73%. Assuming sugar production at 2.50 million tons on early start of the crushing campaign, the timely start up as pleaded, could produce 290,000 tons extra sugar. This is precisely in the national, industrial, farmers and consumers interests. There is no justification, whatsoever, for a rush about beginning of the operations. Table bears out the recovery trend during the past five years, and underscores what would be the correct approach.

There is a need for firm policy with regard to date of commencement of annual crushing season. The following data of sugarcane recovery in Sindh shall serve as input to decide about the most suitable time factor for it.

Month by month sugar recovery percentage of Sindh

Season

1995-96

1996-97

1997-98

1998-99

1999-2000

October

6.14

--

--

--

5.14

November

8.80

7.62

7.78

6.82

7.64

December

9.72

9.62

9.65

8.45

9.04

January

10.12

9.82

10.07

9.11

9.71

February

11.08

10.53

10.30

9.52

10.99

March

11.77

11.09

10.84

10.09

11.53

April

11.21

--

11.58

11.38

--

It would be observed that sugarcane achieves maturity in December and improvement in its sugar content into April. It is apparent that in normal crop year commencement of sugarcane crushing campaign shall not be prior to mid-November.

Loss of high magnitude in sugar recovery occurs by post harvest and crushing sequence of sugarcane. This is attributable to the absence of contractual arrangements between the mills and the growers. Such loss is estimated about 1% of the sugarcane crushing. Assignment of sugarcane areas to the mills is a standard practice being followed for cogent reasons. Policies oriented to productivity are in the interest of all the stakeholders which can be secured by a system of sugarcane supply based on written contracts. Bottlenecks, if any, in its implementation can be overcome with a will, goodwill and experience. Improvement in sugar recovery will contribute to additional revenues to all stakeholders, besides ending exploitation of the situation by the middlemen/commission agents.

In pleading for early start of crushing season, usually the farmers assert about their compulsion for clearing part of the land under sugarcane crop for sowing wheat in November. This has been much and often articulated, though lacks realism. The reason usually given for an early start is to vacate land for planting of wheat and financial needs. Both these reasons lack substance. Cropping intensity stipulation leaves enough fallow land during Kharif which is prepared for planting of wheat. Practically, sugarcane does not compete with wheat for land and water. The area harvested in October and November by the end of wheat sowing period is too small to have a bearing on wheat area, The financial advantages of commencement of the season in proper time are of a magnitude that outweight other small considerations and, therefore, must receive attention of the Sindh government.

Sugarcane supply in Sindh got slashed by a sizeable 28% and sugar production fell by hefty 26.36%. Some recoup in it was by recovery improved to 9.18 (8.96) percent. Though better, it trailed behind the real potential. Sindh's supportive climatic character ought to give yield a minimum of 80 tons and recovery of 10.5 percent. This goal is achievable in mid-term through supervised cultivation method, adequate input mix, timely and proper care of the crop.

Lack of supervised sugarcane crop culture, absence of varietal development pursuit and like bedevelling factors have led to a considerable deterioration in the quantity of sugarcane. This has adversely affected yields and recoveries. Cyclone that swept Badin and Thatta districts of Sindh during 1999 almost uprooted the then existing sugarcane crop in these districts. Combined result of such odds was a sharp reduction to below 11 million tons of sugarcane being available to the sugar industry of Sindh, as against the effective crushing capacity of 24 million tons. As a result, operating efficiency dipped to 46.13%. It was the record lowest touched in Sindh. Drastically low level.. of working threw the sugar industry of Sindh in disarray.

Effective capacity and operating efficiency

Season

Sugarcane Crushing Tons

Effective Crushing Capacity Tons

Operating Efficiency %

1992-93

12,724,944

16,870,500

75.43

1993-94

13,031,888

18,310,500

71.17

1994-95

12,037,995

18,310,500

65.74

1995-96

10,341,335

19,030,500

54.34

1996-97

10,314,835

21,910,500

47.08

1997-98

13,853,313

21,910,500

63.23

1998-99

15,095,412

23,535,098

64.14

1999-20

10,856,757

23,535,098

46.13

Low level of operating efficiency has been a major stumbling block in opening up new vistas of diversification by the sugar industry, potentials of which are rated high. Efforts at the PSMA level to shore up the economic vitals have not been met with expected optimism. Nonetheless, efforts tend to be our responsibility and these shall remain persistent to achieve ends.

Cost of production can be brought down reasonably with higher utilisation of the plant capacities. Operational efficiency in Sindh has slid from 75% in 1992-93 to 46% in 1999-2000. Capacity utilisation squarely rests on sugarcane supplies which dropped by 28%. There is little likelihood of its improvement during the next crushing season if not more. Drop in the area and yield of sugarcane accentuated by severe limitation of irrigation water encountered in the previous year. Dependence on large increase in area to meet sugarcane requirements is not judicious by several reasons, including the limitation of irrigation water supply which is becoming more difficult. This situation demands dynamic rather than conventional Research and Development which can be had through active participation of the private sector. Equally important for positive results is toning up on-farm water management, backed by improvement in irrigation infrastructure to eliminate wastage. A number of sugar units are located in the non-perennial water supply areas and shortage of irrigation water is causing dislocation. Changes in methods of irrigation through technology developed indigenously, to have it cost effective must receive urgent attention.

Large economic potential of sugar industry in growth of manufacturing sector and contribution of sugarcane in growth of commodity producing sector in the national economy can be fully realised by adopting supportive policy framework. Price linkage of raw material with end product would have productivity orientation input. In this regard, improvement needed in the sugar economy be evolved and implemented.


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