PSMA to shut down sugar mills in upcoming season if issues not addressed

ISLAMABAD: Pakistan Sugar Mill Association (PSMA) has decided to shut down sugar mills rather than bearing a loss of Rs15 per kg on the production of sugar.

PSMA Chairman Aslam Faruque on Tuesday in a media briefing said, “There is an almost unanimous verdict from the sugar mills across Pakistan, they would rather not start crushing season than to sustain Rs15 kg loss on the production of sugar due to the mismatch in sugarcane price and the price for sugar.”

He further added that provincial governments set sugarcane prices and the federal government fixes the sugar price, meanwhile, PSMA has no role in determining the sugar price as dubbed in media and other forums.

He said that the government has set minimum support price at Rs180 for sugarcane for the last four years and currently sugar prices stand at Rs48 in the market which should be around Rs63 per kg. He also urged that the government should allow the export of 1.5 million tonnes surplus production.

Aslam added for the past couple of years PSMA has repeatedly urged the government to allow timely exports to reduce the surplus of sugar, stabilize local market prices and also earn foreign exchange for the country.

The key question to ask is why would a business solely set up to crush sugarcane with approximately half a trillion rupee of investment – 90 sugar mills with an average value of Rs6 billion – with an offseason of 7 months, not want to run this year?, said Aslam Faruque.

Aslam went on to say that on the other hand, when fixing sugarcane prices successive governments repeatedly overlook the policies they set on sugar. He pointed out that ever since the new federal and provincial governments have taken charge, PSMA has been making all-out efforts to get their attention for a workable solution to the industry’s problems and to a resolution of the past dues of the industry; major one being Rs14 billion payable for mills that exported sugar and also made payments of approximately Rs300 billion in sugar cane liabilities paid to growers. The same was also validated by a suo moto notice taken by the Supreme Court.

Sadly, despite many meetings, not a single issue has been resolved and no positive direction has been taken by either the federal or the provincial governments.

If timely decisions are taken the situation could be more suitable for mills to operate. Is it fair of the government to ask sugar mills to start crushing without paying any heed to structural issues of the industry and cash losses being inevitable?, said PSMA chairman.

Every business has the fundamental right to make economic decisions about their viability and business operations however the situation in Pakistan is complicated as the sugar industry is regulated. Each sugar mill is told when to run and has a cone price dictated to it and yet has no clarity about the price it will be able to charge for its final product. Sugar mills are not given an upfront export permission to sell their excess sugar when they need to do so. As of today, Pakistan sits with a major surplus but exports are still not allowed due to the harsh conditions set by the government.

PSMA would like to reiterate that should the government take coercive measures to get mills to start in spite of the mills being unwilling to run till such time that a fair operating system is provided for the industry as a whole. It must be noted that it remains the constitutional right of each sugar mill to decide whether to run because mills need to answer to their many stakeholders. Mills run as businesses that are answerable to a large number of shareholders given that a number of sugar mills operate as publicity listed companies.