Sugarcane has the largest industrial base after cotton in agricultural sector of Pakistan. For the last 2-3 seasons there has been unrest in growers’ community and the sugar industry. Growers claim an enhanced rate of cane and timely payment to growers; while the Pakistan sugar industry claims that their economic viability is at stake due to low market prices of sugar against the prevailing price of cane fixed by the Government. According to them a number of sugar mills are at the verge of insolvencies. Considering the enhanced prices of inputs involved in cane production and livelihood of a common man, growers claim can’t be ignored and has its weight. On the other hand, millers issue is also complicated and need to be analyzed.
An exercise has been done on sugar production cost at the cane purchase price of Rs. 180 per mound , sugar mills recoveries of 9.0, 9.5, 10.0, 10.5, 11.0, 11.5 and 12 .0 percent and the sale price of sugar @Rs. 50, 55 and 60 per Kg sugar.
A Layman’s Analysis on Production Cost of Sugar
Assumptions and basis for sugar production cost per 100 mounds cane.
- Cane price= Rs.180/- per mound
- Sugar prices, three rates; viz: Rs. 50, 55, 60
- Sale tax @ 8% on sale price of sugar.
- Milling & processing cost @ Rs. 10/- per kg sugar; just an estimate, assessed on negotiations with various sugar mills; it varied from Rs. 8/- to 11/-.per mound of sugar.
- Loss due to weight of trash (3%), brought with cane = Rs 540 per 100 mounds cane.
Table-1:A layman’s analysis of production cost of sugar
from 100 mounds cane
|Purchase price of cane||
Income from sale of sugar
at three rates:
Rs. Per Kg sugar
Per mound of cane
(Rs 18,000 for 100 mounds)
Income from sugar=Cost on cane – manufacture cost of sugar in factory – Sale tax –trash equivalent cost
The data in Table-1 indicate that at the sugar price of Rs.50/- per Kg., none of the reported recoveries favorably match the prevailing price of cane. The sugar price of Rs 55/- per Kg can match sugar recovery level of 11.5 percent and the sugar price of Rs. 60 per Kg can match the reported cane price at the recovery level of 10.5 percent.
According to sugar industry personals the sugar mills having sugar recovery of less than 10.5% are not in a position to dispose of sugar at equitable cane price and are entirely at loss. Let the views of sugar industry be set aside, the data clearly show that the sugar mill recoveries have the dominant role to meet the challenges of sugar price hike in sugar market.
In this context where our sugar industry stands can be evaluated from the average sugar recoveries of some selected sugar mills in Pakistan (Table-2). Comparing production cost of sugar given in Table-1, the economics of the sugar industry can be adjudged from the recoveries obtained by various sugar mills. Quite a few sugar mills can match the required standard of achievable recovery at the prevailing cane price.
Table -2: Periodic sugar recoveries of some selected sugar mills in
Punjab and Sindh, during 2016-17
|Punjab – sugar mills||
|Sindh – -Sugar mills||
|JDW, Rahimyar Khan||10.52||Mehran Sugar Mills, Tando Allahyar||11.44|
|Hamza – Khanpur||10.48||Faran, Sh. Bhirkew, Hyderabad||10.85|
|Indus, Rajanpur||10.43||Mirpur Khas, Mirpur Khas||10.75|
|Noon, Bhalwal||9.95||Shah Murad, Jhok Sharif||10.71|
|Husein, Jaranwala||9.63||Habib, Nawabshah||10.35|
|Chanar, Tandlianwala||9.35||Al Noor, Moro||9.95|
|Baba Fareed, Okara||9.13||Ansari, Matli||9.84|
The data indicate that at the fixed cane price of Rs. 180 per mound, a recovery level of 10.5 percent is a bench mark for economic viability of sugar industry. It indicates that to attain an economic level, this sugar recovery (10.5%) would be a target to achieve, by the Pak sugar industry. How to achieve and till when to achieve is the point to be focused by the sugar industry. At the same time growers demand an appreciable rise in cane price. If it happens the recovery target would eventually be changed, and till what a level and what would be the end. One apparently feels that all the burden is thrust on sugar industry. In sugar production, both the parties the cane growers and the sugar industry are dependent on one another, their co-existence in the field demand economic viability of both the partners. In the present economic scenario growers are screaming as to why they grew the cane crop while millers are suspended as to why they manufactured the sugar and now where to dump.
Then, what measures should be taken to resolve the present crises. The economists and the planners in consultation with the growers and sugar industry should join hands to solve the crisis. To me the probable measures could be:
- Rise in market price of sugar.
- Increase in sugar mills recovery
- To fix sugar price along with cane price
- Quality premium on enhanced recovery of cane
- To link cane price at certain recovery level with market price of sugar.
Rise in market price of sugar.
In open market system, the sugar price can’t be controlled by an order. However, one has to keep an eye on price fluctuation and demand and supply position of the commodity. Government has to take steps to control the situation. Commodity prices are also affected by available stocks in international market and this should specifically be visualized by the Government. Unfortunately, our Govt. do not seem to be much serious on sugar issue. During October – December 2016, international sugar market was at around Dollar 500-550 a ton. A plenty of previous year’s sugar was in stock and the prevailing cane crop (2016-17) having a vigorous growth was expecting a record sugar production. Besides repeated requests by the sugar industry, Government did not allow to export the surplus stocks. The result is over production and bumper stocks to create present crises amongst growers and industry. At the present international prices of Dollars 360 a ton, there are rumors for sugar disposal on certain subsidy prices; what a fun?
Increase in sugar mills recoveries.
The present average sugar mills recoveries of 9.5% can be increased to 11,5% by adopting:
a)improved agricultural practices and
b)reducing recovery losses in sugar mills.
- A) Improved agricultural practices.
Adjust planting time: Cane crop planted in September/October give enhanced cane yield of 25-30 percent and sugar recovery by about 10 percent over March planting. Sugar yield is thereby increased by 40-50 percent.
Cane varieties: Cane variety is the single most dominant factor in improving sugar mills recoveries. High sugar early maturing varieties have the potential of giving 11.5-12.5% recovery. A number of high sugar varieties have been released by Sugarcane Research Institutes in Pakistan, during the past decades. They are medium to early maturing having average to pretty better recoveries. These are BL 4, BF129, Thatha-ten, SPSG26, NIA2004, Thatha 326, Thahta 2109, Triton, CP 77-400, HSF240, HSF242, SPF234, CPF237, CPF246 and CPF 248.
Cane growers should not stick to one variety, should have a set of two or three varieties grown at their farms. This is to sustain the ill effect of sudden weather changes, irrigation stress and manage harvesting as per varietal maturity times.
Fertilizer management: Balanced fertilizes dose including N, P, K to be incorporated in crop, well in time. Higher rate of nitrogen fertilizer with delayed application reduce sugar recovery; this practice should be avoided. Potash fertilizer help enhance recovery and must not be avoided.
Irrigation management: Excessive irrigation during harvesting reduce sugar recovery; Irrigation to the crop should be withheld 15 to 25 days before harvesting, depending upon season.
Diseases and pest control: A healthy crop free of pests and diseases ensure good sugar yields.
Crop harvest management: Crop to be harvested according to maturity time of cane crop; an early maturing variety, September planted crop and ratoons to be preferred for early harvesting. Cane should be harvested free of trash and tops and to be supplied afresh to sugar mills carrier.
Cane procurement strategies: This is as important as crop growing. Efficient control on harvesting, issue of permits for timely cane supplies and reducing cut to crush time to avoid post-harvest staling losses. Emphasis has to be laid on receiving tops and trash free fresh cane on cane carrier. Tops and trash attached with cane and staling cause huge losses to the industry, as four days staling reduce recovery by 1.27 units and 5 percent trash attached to cane reduce recovery by 0.60 units.
- B) reducing recovery losses in sugar mills.
:Sugar mills are showing on an average cane milling and processing losses of 2.5 percent. Efforts are needed to take up measures to reduce these factory losses to 1.8 percent or even less.
Scope for reducing losses in factory milling and processing and improving recoveries in cane fields.
- Scope for reducing losses in the factory = existing over 2.5% loss can be reduced to 1.8 % or even less.
- Scope for improving average sugar recovery in Pak sugar industry over7 units.
- Scope for improving sugar recovery in cane field = Existing 9.5% can be enhanced to 11.5% = 2 units
It may however be noted that this can’t be achieved all of a sudden; it would take years with huge investment in field and factory, for which a good deal of vision and planning is needed.
To fix sugar price along with cane price:
It is somewhat like the system adopted during rationing days that sugar price was fixed for its supply to consumers as a fixed ration on Depoe’s. Sugar was purchased by the Govt. This system was an assurance to millers for complete utilization of their product (sugar) on advance payment. This system also assured timely payment to growers for their cane supplies to nearby mills. With adoption of De-zoning policy by the Govt., fixation of sugar price was altogether abandoned and growers are open to dispose of their cane to any sugar factory they like for which a minimum cane price is fixed by the Government. Now the market is open both for cane supplies, cane purchase and sugar disposal. Marketing trend sometimes favor growers and other times to millers. Sugarcane Act has some regulations to keep the system in order, but there are lacunae and limitations in policies that any plan of sugar recovery improvements cannot be implemented.
Quality premium on enhanced recovery of cane:
This is not a new approach the system is already in vogue in Pakistan. A minimum cane price is fixed for a bench mark recovery of cane and a quality premium of Rs.0.50is allowed for every 0.1-unit increase in recovery over the bench mark recovery of 8 7% in Sindh and 8.5% in Punjab. The system remained in operation for a year or so, growers, supplying quality cane to the sugar mill were greatly benefitted. Unfortunately to get some clarification millers went to the Supreme Court and the implementation was suspended as a Legal Stay order, as such Government notification for quality premium was held in abeyance. This type of system is in practice in India.
To link cane price at certain recovery level with market price of sugar.
The system is in vogue in a number of cane growing countries like Australia, USA, Mauritius. This provides incentive both to millers and cane growers. The result is that the millers are achieving sugar recovery level of i3.5 percent. In this system, cane supplied to sugar mills is analyzed for its recover and is received as sugar commodity as per its sugar contents. This sugar is shared amongst growers and millers as per their quota pre-determined on negotiation; it could be 60:40, 65:35, or 68:32, etc. Sugar is sold by a Board (having members from Millers, Growers and the Govt.). Growers are given the payments based on their sugar recovered from their cane supplied to the factory. It is a fool proof system with its successful implementation. It may be taken as guaranteed that Sugar Board has strict eyes on national and international sugar market and no member likes to go in loss. Details may be discussed and worked out. Aforementioned methods are direct or indirect approaches for initiating the growers to adopt measures to grow quality cane having high sugar contents.
This article is collectively authored by Karim Bakhsh Malik and Dr Muhammad Ijaz Tabassum.