psma-7

a) Revenues by yields
Cost of sugar production is precisely an outcome of sugarcane support price, vis-a-vis recovery benchmark, latter kept constant since the support price mechanism came into operation. Increase in support price and premium for higher recovery was administered often, at times to the extent of creating distortion. This provided security to the sugarcane growers about their revenues to be always cost plus. Pursuits in cultivating high yield and sucrose varieties of sugarcane fell victim of complacency and got virtually overlooked by assured revenue and returns. This is borne by the average national yields at about 47 tons per hectare and average national sugar recovery of about 8.39% for the review year.

Sugar industry wants that the sugarcane growers are adequately rewarded of their sugarcane harvest. Their revenues and earning provided linked with yields and sucrose instead of the outdated mechanism of support price, could bring the desired results. It is a reality that sugarcane support price in Pakistan is one of the highest, while sugarcane yields and sucrose are one of the lowest! This is the reason of sugar business becoming sour for the industry and the consumers. Removal of unrealistic safeguards and their replacement by sound realistic methods would make sugar sweet for all the stakeholders.

b) Gains by growth
Sugarcane growers' monetary gain needs to be linked with sugarcane yield. It is their domain to excel which serves national interests. It is a fact that yields and recoveries in Pakistan have been the lowest despite tremendous scope for achieving dramatic growth in them. Exploiting the scope will be a correct, legitimate and rational approach of gains by the growers. Relevant mechanism needs to be put in place and timely to gear it up.

National sugarcane yield for the past one decade has been in the range of 39 to 47 tons per hectare with exception of $0 tons for 1997-98. This has been a bane, being the lowest among the main sugarcane cultivating countries. According to the research men, yields range can be raised to 72 tons per hectare by installing supervised sugarcane cultivation. It can be improved further to 90/110 tons per hectare by inducting varietal research and development, which remain wholly neglected.

Likewise, sugar recovery can be improved from the low level of 8.7% to 10/11% by sucrose enrichment in sugarcane. On achieving these targets, with the given acreage of 1000 thousand hectares under the sugarcane crop, sugarcane and sugar production can be substantially increased, as illustrated in the following:

Yield	Sugarcane crop	Sugarcane percent	Utilisation volume	Recovery %	Sugar production
T/H	M/T		M/T		M/T
50	50	67	34	9.00	3.06
55	55	69	38	9.30	3.53
60	60	71	43	9.50	4.08
65	65	73	47	9.70	4.55
70	70	76	52	9.90	5.14
75	75	77	58	10.10	5.85
80	80	79	63	10.30	6.48
85	85	81	69	10.50	7.24
90	90	83	75	10.70	8.02

Note : T/H stands for tons per hectare. M/T stands for million tons.

Sound plan for sugarcane production, with supervised and managed cultivation culture is eagerly awaited. For this objective to attain, a three year plan be designed to achieve reasonably increased sugarcane yields. This pursuit shall prove rewarding and no crutches of support price structure, in vogue for the past many years at a stretch, would be needed. The current malady of high cost of sugar production created by the existing structure can also be addressed by executing this strategy.

The PSMA-SZ have persistently pointed out that the system in vogue is a fallacy in assessing cost of sugarcane production and deciding increase in support price of sugarcane out of proportion. This malady has carried adverse influence on the cost of sugar production. After setting the sugar marketing to free price system during 1984, the system of deciding sugarcane price alone has become out of tune.

Being least concerned about the cost of production and cost of sales of sugar and price that must give a return on equity employed, atleast equal to prevalent economic rate of return, all the successive governments have identically shown a tendency of great anxiety about sugar prices. Sugar need not be seen in isolation. Sugar has direct link with sugarcane cost/price and with general price trend in the economy.

The PSMA-SZ continues to plead for considering the case of cost-price disequilibrium dispassionately so as to set an equitable mechanism in place to allow sugar industry play its role in the national economy. Alternatively, suitable mechanism be arranged for sugar price find its level for survival of the sugar industry.

Sugar industry of Sindh is plagued by several problems and they are piling up. Removal of identified and agreed upon hardships, remain awaiting for regularisation, rectification and like measures. As a result, problems keep on compounding and this implies financial stress. It is not being realised. For an instance, the number of taxes and its cumulative burden placed on sugar, a food item and a vital ingredient of several other food items and consumer products bears no justification. Some other major problems are discussed briefly below so as to place them in sharp focus.

a) Market committee fee
Levy of fees by the market committee on sugar mills bears no justification. It implies an extortion. It is persisting despite a number of representations lodged against its reationale. The Sindh government feels positive about its irrationality in line with PSMA's rationale. Yet amdendment is awaited to exempt the sugar industry from the stress. Fee and tax bear different connotations. Fee is chargeable for specific service/s. MCs have no role, whatsoever, in marketing of sugarcane. Sugarcane supply and prices are supervised by Cane Commissioner under a separate statute, being Sugar Factories Control Act, 1950. Sugarcane prices are announced by the provincial governments on recommendation of the federal government. Recovery of market committee fee has no reason. It is, as such, coercive in effect. Two sets of acts for a single purpose, besides charging fees without services, continue to erode resources of the sugar industry. Sindh provincial government directives to dismantle deep rooted corrupt practices and consequent malaise need to take care of this ghost roaming around, eating up sugar industry's vitals.

b) Sugarcane/Road Cess
Road cess is being recovered since 1964 for the two specific purposes, (a) construction/ reconstruction, repairs and maintenance of roads network linking sugarcane farms with sugar factories and (b) undertaking varietal research and development for sugarcane. The cess fund rate in Sindh has been increasing over the years. The accounts of the fund "utilisation" have not been seen, due perhaps to its being questionable. Ignoring this, increase in the rate was notified on February 19, 1995 and Act for it was passed during March 1995.

			Basis of Contribution by
Season/Year	Rate per 40 kgs. of sugarcane (Paisa)	Increase %	Sugarcane Growers (Paisa / %)	by Sugar Mills( Paisa / %)
1964-73	12	--	6 / 50%	6 / 50 %
1974-89	18	50	9 / 50%	9 / 50%
1990-94	28	55	14 / 50%	14 / 50%
1995-99	100	257	25 / 25%	75 / 75%

A phenomenal escalation in the rate has certainly been burdensome, inequitable, untimely, besides bearing no reason for enhancement. It is laudable that the then Chief Minister, Chief Secretary, Secretary Agriculture, Secretary Industries and other officials of Sindh government appreciated the problem, its nature and its bidding for odds. They have directed for implementing the agreement hammered out on June 20, 1996 by the PSMA-SZ with Advisor Finance to the then Chief Minister. It needs to be implemented.

The PSMA-SZ appreciates formation of millswise committees to take care of roads building/rebuilding in a bid to ensure effective utilisation of the cess fund. We hope, this step will create efficient roads network connecting farms with factories.

c) Local taxes
The government of Pakistan deserves commenation for the courage of doing away with the obstructive nature of multiple forms, rates and levels of local taxes which, by and large, were going elsewhere and not in the exchequer. It was just creating excess burdens on business and promoting corruptive practices all at the cost of the consumers. It is hoped that this evil chapter will never be reopened as its distaste to all has been well known. Now the District Governments have been constituted, with power to tax and undertaken development on district levels. It is hoped that sugar industry is protected from fresh levies.