Group Project

Public Administration & Society in Pakistan

Topic: Sugar Crisis in Pakistan

Submitted to:

Ms. Ayesha Hanif

Submitted by:

Bushra Riaz MHRM-M-26

Muhammad Yasir Ummer MPA-A-10

Muhammad Ali Akram MHRM-A-25

Muhammad Kafait Hussain Kaifi MPA-M-07

Ali Zahid Dogar MPA-A-43

Shoaib Khalid MPA-M-25

Maria Imtiaz MHRM-M-10

Semester 1st

Section-A

Session: 2009-2011
DATED: 21st January, 2010

Institute of Administrative Sciences

University of the Punjab

Contents: Page(s)

1. Description of Sugar Crisis in Pakistan 2-15

1.1. Pakistan & Sugar Production

1.2. Pakistan Sugarcane Area and Yield

1.3. Comparison of Sugar Cane Yield with other Countries

1.4. Consumption trends of Sugar in Pakistan

1.5. Pakistan Sugar Annual Report 2009

1.6. Production Policy by Government of Pakistan

1.7. Refined Sugar production, Supply and Demand

1.8. Export & Import of Sugar in Pakistan

1.9. Sugar Production Facts 2008-2009

1.10. Sugar Crisis in Pakistan

1.11. Current Scenario

1.12. Social Impact of Sugar Crisis

2. Reasons of Sugar Crisis 14-18

3. Solutions to Sugar Crisis in Pakistan 18-21

4. Political Influence, Crisis in Government’s View &

Ground Reality 21-22

5. References 23
 Description of Sugar Crisis in Pakistan
Pakistan & Sugar Production:

The Pakistan is an agriculture country, and agriculture is backbone of

economy. Pakistan is also main producer of sugar in worldwide. Sugarcane is
an important cash crop of Pakistan. It forms the basis for many important
industries like Gur, molasses, alcohol, sugar beverages, chipboard, paper,
confectionery and provides raw materials to mainly other industries such as
chemicals, plastics, paints, synthetics, fiber, insecticides, detergents etc.
According to Food and Agriculture Organization of The United Nations and
FAOSTAT, Pakistan is ranked fifth in world cane acreage and 15th in sugar
production. Pakistan is the 5th largest country in the world in terms of area
under sugar cane cultivation, 11th by production and 60th in; yield.

Pakistan Sugarcane Area and Yield:

The following table shows the production of sugar in Pakistan from year
2004-2009 in terms of area, production & yield. It is clearly evident from the
statistics shown below that though the production has increased across the
years but the yield has remained constant which shows the signs of
inefficiency of the production techniques. Another reason of this low yield is
according to Annual report 2009 of PSMA is that milling policies of the
current crushing season have provided strong disincentives to sugarcane
growers. Sugar mills reduced the price offered per 40 kilos by Rs 5.0 – about
US$ 0.08 – and continued the practice of taking large deductions to meet
their cane quality standards, causing cane growers to shift to more profitable
crops.

Sugar Industries’ Contribution in Pakistan:

The sugar industry in Pakistan is the 2nd largest agro based industry after
textiles comprising 81 sugar mills with annual crushing capacity of over 6.1
million tones. Sugarcane farming and sugar manufacturing contribute
significantly to the national exchequer in the form of various taxes and
levies. The sugar sector constitutes 4.2 per cent of manufacturing and its
by-products have contributed significantly towards the foreign exchange
resources through import substitution. The Sugar industry employs over
75000 people, including management experts; technologists; engineers;
financial experts; skilled, semiskilled and unskilled workers. It contributes
around 4 billion rupees only under the head of excise duty and other levies
to the Government are also paramount significance.

Key facts are as under:

No. of Mills 81 (71-Operational, 2-Under Construction, 4-Completed)

Crushing Capacity 6.1 Million tones

Contribution to Economy 3.0 – 4.0 Million Tones

- Share in GDP 1.9%

- Employment 1.5 million (directly & indirectly)

- Total Investment PKR 100 Billion (Approx)

Average Yield per Hector 46.8 Tones

Total Cane Production 45.0 – 55.0 Million Tones

Cane Available 30-43 Million Tones

Average recovery of sugar 9.1 (vs. world avg. 10.6%)

Per Capita Consumption 25.8 kilograms per capita

Contribution to exchequer Rs. 12.16 Billion

Comparison of Sugar Cane Yield with other Countries:

Although, Pakistan happens to be the world's fifth largest grower of

sugarcane it has perhaps the lowest yield in the world. The average
sugarcane yields in Pakistan have remained between 40-45 tons per hectare
which is considerably less than those obtained in many other countries.
Average yield of sugarcane in the world is around: 65 metric tons per
hectare and Asia 65.4 while China 77.1, India 70.6, Pakistan 46.0, Philippines
92.6, Thailand 92.6, Australia 75.5 and Egypt 105 tons per hectare. The
sugar recovery is 8.5 % against the obtainable recovery of 10.5%. Statistics
for the Sugar Cane Yield of World are shown below:

Country Cane Yield (T/ha) Sugar Recovery Sugar Yield (t/ha)

(%)

Australia 100.4 13.8 13.85

Egypt 110.8 11.5 12.74
Brazil 68.4 14.5 9.91
USA 80.2 11.7 9.38
Colombia 80.5 11.5 9.26
Mexico 79.5 11.6 9.22
India 66.9 9.9 6.64
Pakistan 49.0 9.2 3.54
World Avg. 64.4 10.6 6.82

Consumption trends of Sugar in Pakistan:

The Pakistani nation is called obsessed for sweet and sugar consumption is
high. The statistics shows that the per capita consumption as well as overall
calorie intake has been rising. Daily Jang reports that “The sweet obsessed
Pakistani nation consumes sugar worth of Rs 200 billion annually”. USDA
Pakistan Annual Sugar Report states that total per capita refined sugar
consumption is estimated at 25 kilograms and it is based on improved supply
and strong demand. Falling behind Pakistan are other countries of the region
like India with 14 kg/person, China with 11 kg/person and Bangladesh with
10 kg/person. Sugar consumption has been showing an increasing trend for
the last 15 years. It has increased from 2.89 million tons in 1995-96 to 3.95
million tons in 2005-06. One of the many reasons behind this increase is rise
in the total population of the country, which has reached 170 million. The per
capita sugar consumption data shows that it has also risen from 22.2 kg in
1995 to 25.8 kg in 2004-05. For 2008-09, the overall sugar consumption was
forecasted at over 4 million tons.

Pakistan Sugar Annual Report 2009

Pakistan's MY 2009/10 sugar production is forecast at 3.65 million tonnes up
about three per cent from the current year estimate of 3.56 million tonnes,
according to the USDA Foreign Agricultural Service. Consumption is forecast
at 4.35 million tonnes and imports at 730,000 tonnes. Trial production of
sugar beet has proven successful but industry is reluctant to encourage
expanded production due to technical and administrative challenges.
Pakistan’s sugar industry produces more than half a million tons of ethanol
per annum from cane molasses, over 50 per cent of which is exported to
Europe, Far East and Middle East countries.

Production Policy by Government of Pakistan:

The Government of Pakistan (GOP) is striving to achieve self-sufficiency and

sustainability in sugar production by ensuring the availability of inputs and
establishing a sugarcane support price which is acceptable to all
stakeholders. The sugar industry is looking for value added by-products, as
well as reducing costs and promoting cultivation of high sucrose cane.

The Government supports cane production by setting an indicative price,

which is announced either before or after planting. The Federal government
generally does not procure cane, but authorizes Provincial governments to
fix respective cane prices in consultation with representatives of both the
sugar industry and farmer organizations. For MY 2009/10 the state
Government of the Punjab has enhanced the cane purchase price by 25
percent over the previous year making it Rs.100 per 40 Kg ($31.25 per MT).

The Ministry of Food, Agriculture and Livestock (MINFAL) is in consultation

with the Pakistan Sugar Mills Association (PSMA) in an effort to increase
sugarcane productivity and to increase the capacity of sugar mills which are
currently operating at 50 percent capacity level. The GOP is also looking to
amend the Sugar Factory Control Act of 1950 in order to create a more
conducive market environment for stakeholders. A technical committee has
been appointed by the GOP to develop a methodology for linking sugarcane
prices with sugar recovery rates. This qualitative measure should improve
the production dynamics and profitability for both farmers and millers.

Refined Sugar production, Supply and Demand given in the Pakistan

Sugar Annual Report 2009:
Export & Import of Sugar in Pakistan:

Market Year 2009/10 sugar imports are forecast at 730,000 MT, and MY
2008/09 sugar imports estimated at 700,000 MT. The government has
traditionally imported sugar through the Trading Corporation of Pakistan
(TCP) in an effort to moderate sugar prices. However, in January 2009, the
government ended the sale of sugar at subsidized prices to the state owned
Utility Stores Corporations. Consequently an increasing share of Pakistan’s
sugar imports is expected to be made up of private sector imports, expected
to account for 100 percent of sugar imports in MY 2009/10.

Imports of raw sugar are subject to a 25 percent import duty, a 16 percent

sales tax, a 10 percent regulatory duty, a 2 percent withholding tax, and a
one percent central excise duty (total tax = 54 percent), where as imports of
refined sugar may enter duty free (although still subject to a total tax rate of
29 percent). In anticipation of the rationalization of the Pakistan import
regime for sugar, the PS&D includes estimates of raw sugar imports at
300,000 tons in MY2008/09 and 200,000 tons in MY 2009/10.

Monthly Average Retail Prices of Sugar:

Indicative Prices of Sugarcane by Province:

Sugar Production Facts 2008-2009:

For 2008-09, sugarcane has been sown in the area of 1029 thousand
hectares, 17.1 percent lower than last year. Sugarcane production for the
year 2008-09 is estimated at 50.0 million tons, against 63.9 million tons last
year. This indicates significant decline of 21.7 percent over the production of
last year. The main reasons of lower production are shortage of irrigation
water, shifting of area to rice crop less use of DAP and non-payments of dues
to farmers by the sugar mills on time for the last year’s crop.

The price of sugarcane accounts for 85 per cent of the total cost of the
production of sugar. The total size of the sugarcane crop was 50 million tons
in 2008-09 as against a bumper crop of 63.9 million tons in the previous year
– almost 14 million tons less. Accordingly, sugar production was expected to
be 3.2 million tons as against 4.7 million tons last year – 1.5 million tons less.
Pakistan's total consumption was estimated at 4.2 million tons. Hence, the
current year's (November 2008 to October 2009) sugar production was
expected to be one million tons short of the consumption requirement.
However, the country had a carry-over stock of 800,000 tons from the
previous year. Therefore, the estimated shortfall for the current year was
200,000 tons. It has, however, been a common practice to begin the new
crushing season with a carry-over stock of at least 400,000 tons in order to
keep the price of sugar stable. Accordingly, the estimated shortfall was
600,000 tons assuming a carry-over stock of 400,000 tons.

Sugar Crisis in Pakistan:

The recent sugar crisis in Pakistan materialized because of the shortage in

supply. There are two kinds of supply shortages—Natural or Artificial. Natural
shortage include i) unfavorable weather conditions that reduce supplies, ii)
adverse market structure that leads to decrease in production over a period
of time and iii) change in government policies that negatively impact
production. Meanwhile, artificial shortfall means to deliberately withhold
supplies to create a shortage for profit. The current on going crisis is
artificially created in order to maximize the rate of profits. It is also
surprisingly that before Ramadan there was no signs of crisis rather reports
tells that we have enough sugar to meet the demand. On May 4 2009,
Iskandar Khan, Chairman, PSMA, stated for the record, that "at present,
sugar mills and TCP have sugar stocks of 2,226,531 tons, and 321,035 tons
respectively, totaling 2,547,566 tons. Besides this, there is always a stock of
400,000 to 500,000 tons in the domestic market and pipeline. Based on the
current consumption level, this stock will last for over nine months i.e. up to
December 2009, while the next crushing season would commence in
November 2009. We have enough sugar to cater for our entire year's
demand.”

It is a well-known fact that the sugar consumption rises during Ramadan.

Therefore, before the beginning of this month, that is, early August, the price
of sugar started rising and averaged to Rs52.5/kg from Rs47.2/kg in July. On
26 July, the Government of Pakistan imposed a ban on the export of sugar
and removed the sugar import duty in an attempt to avert a potential sugar
crisis. Now what we see is that hoarding and storage of Sugar in order to
raise the price. Along with private Sugar mills owners, Trading Corporation of
Pakistan is also having adequate supplies of sugar. TCP chairman Saeed
Ahmed Khan at a news briefing in his office stated that TCP is also holding
stocks of 75,000 tons imported sugar and expects another 50,000 tons to
reach Karachi by the end of this month which would take total stocks of
imported sugar to 125,000 tons. The many players are in this dirty game.
They rage from top officials, ministers, politicians, capitalist and ruling elite.

On 17 August, Minister for Industries Manzoor Wattoo stated that 50,000

tons of imported sugar would arrive, in 3 days, at a much higher price.
Wattoo stepped in again on 19 August and agreed to an ex mill price of Rs
47 per kg, for Sindh, and Rs 49.75 per kg for the rest of the country, much to
the chagrin of the people. After much hue and cry, with allegations of
Wattoo's complicity with the PSMA being openly bandied about, the Prime
Minister decided to fix the price at Rs 45 per kg, by slashing GST by 50
percent. Thus the Prime Minister did not touch the influential mill owners, but
reduced government revenue for the year, a fact that may well raise the
budget deficit, unless taxes under some other head are raised. The military
owns Fauji sugar mills; more than 50% of the sugar in Pakistan is produced
in sugar mills owned by the most powerful politicians of all major parties and
their families. Multiple sources indicate that the mills owned by President Asif
Ali Zardari’s family and the ruling PPP leaders include Ansari Sugar Mills,
Mirza Sugar Mills, Pangrio Sugar Mills, Sakrand Sugar Mills and Kiran Sugar
Mills. Ashraf Sugar mills are owned by PPP leader and incumbent ZTBL
President Ch Zaka Ashraf.

Following are the important news/events that took place in the context of
sugar crisis in Pakistan:

Sugar mills warn of another crisis next year: Sugar mills have warned
government against low sugar produce likely in the current year as
compared to the demand, and that Pakistan may face a more severe sugar
crisis, if 900000 tonnes of raw sugar are not imported on time. The Pakistan
Sugar Mills Association (PSMA) sent a letter to Federal Ministry of Industry
and Production stating sugar shortage is again feared next year, so the
import of 900000 tonnes of sugar should be permitted. “If timely measures
are not taken to import the raw sugar, the next year will witness a more
severe sugar crisis”, the letter declares. (Geo News: August 27, 2009)

The government is all set to give a go-ahead to the private sector to set up a
sugar refinery at the Gwadar port to meet local demand in the wake of high
prices of the sweetener in the international market, official of the Ministry of
Industries and Production told The News. (September 16, 2009)

Sugar mills formed cartel, CCP tells Supreme Court: The Competition
Commission of Pakistan (CCP) claimed to have found initial signs of collusive
behavior and cartelization among sugar millers in the light of documents
discovered during the search and inspection of the Pakistan Sugar Mills
Association (PSMA) Centre in Islamabad and PSMA Punjab Zone office in
Lahore. (THE NEWS: September 25, 2009)

Chairman of the Competition Commission of Pakistan Khalid Mirza has said

that show-cause notices may be issued to the association of sugar mills after
final evaluation of documents seized from their offices. Talking to Dawn on
Sunday, Mr. Mirza said the decision to issue notices to the Pakistan Sugar
Mills Association would be taken after proof of cartelization was obtained.
(Dawn: 28 Sept, 2009)

Supreme Court gave judgment to sell sugar at 40 rupees per kg but

Islamabad Capital Territory Administration (ACTA) could not ensure the
availability of sugar at Rs40 per kg to the consumers despite Supreme
Court’s direction to the government & Sugar sale continued at Rs50 per kg.
(THE NATION: October 05, 2009)

Sugar goes extinct from markets: Even after Supreme Court of Pakistan
(SCP)’s directives and government’s orders to sell sugar at Rs40 per
kilogram all across country, people find it hard to buy sugar as it has
disappeared form markets in many cities. (Geo News: October 06, 2009)

Sugar crisis further intensified in country: People still continue to suffer for
having to buy sugar at exorbitant prices across the country, as the
commodity is available at Rs100/kg in some parts of the country. According
to sugar industry sources, the sugar mills have 450,000 tones of sugar,
whereas, the Trading Corporation of Pakistan (TCP) has at its godowns
153,332 tones of imported sugar and 35,159 tones of locally purchased
sugar. (Geo News: October 27, 2009)

Over 2000 sugar bags recovered from Karachi: Police claimed to have seized
more than 2000 sacks of sugar from a godwon in Orangi Town locality in
Karachi. (Geo News: October 29, 2009)

Country-wide Sugar crisis continue: The sugar crisis continues all over the
country, as people are deprived of sugar, as sugar mill owners have plainly
refused to supply sugar on prescribed prices despite the government
announcements. In contrast to Supreme Court order, the government has
apparently failed to prompt sugar mill owners to supply sugar at Rs.36 per
kg to the wholesalers, whereas, shopkeepers and wholesalers have stopped
buying sugar at higher prices in order to evade police raids and fines, which
has created a severe dearth of sugar in the retail market. (Geo News:
October 30, 2009)

Sugar crisis worsened in Pakistan: People in most of the areas of the country
are still facing sugar shortage. Even after the announcement made by the
government the sugarcane crushing has yet not been started. Reports from
diverse areas say that the commodity is not available even at the utility
stores and sale points. Officially 40 sales centre and 200 sale points have
been set up in the city of Gujranwala, but the essential food item is not
available at these points. Like several other cities, Multan, Sialkot, Mianwali,
Sheikhupura, Hafizabad and Mandi Bahauddin are also facing scarcity of
sugar. In most of the towns and cities, shopkeepers are selling sugar up to
Rs80/kg, the reports added. (THE NEWS: November 16, 2009)

Government facilitated manipulators during sugar crisis: The ministries of

commerce and industries have told the National Assembly Standing
Committee on Commerce they cancelled the Trading Corporation of
Pakistan’s third tender for import of 50,000 tons of sugar for building
strategic reserves either on the directives of secretaries committee or the
Economic Coordination Committee (ECC). Chairman Standing Committee on
Commerce, Khurram Dastagir, in his observation during a meeting said: “The
government, instead of maintaining price equilibrium in the open market,
facilitated market manipulators.” (THE NEWS: December 15, 2009)

Sugar crises surges again; price at Rs70/kg: New Year brought in its lap
further worries regarding burden of price hike for the poor masses, as not
only the tariffs of power and gas rocketed up but also the sugar reached to
level of Rs65 to 70 per kilo, Geo News reported Saturday. The profiteers are
attributing the reason of price hike to low sugarcane yield this year. The
sugar price in Karachi rose to Rs65/kg, in Lahore Rs65 to 70/kg, Rs66 in
Peshawar and sugar touched highs at Rs62 to 67/kg in Quetta. According to
government statistics, the sugar mills in Sindh and Punjab have to purchase
sugarcane at Rs150 to 160 per mound; while, the government set its support
price at Rs102 to 103. The surging prices of sugarcane have paved the way
for the raise in sugar prices. The government decided to import one million
tones of sugar during the current year and it is being expected that the
stability in sugar prices would be seen after the imported sugar lands in the
local markets. (Geo News: January 02, 2010)

Current Scenario:

According to government statistics, the sugar mills in Sindh and Punjab have
to purchase sugarcane at Rs150 to 160 per mound; while, the government
set its support price at Rs102 to 103. The surging prices of sugarcane have
paved the way for the raise in sugar prices. The sugar price in Karachi rose
to Rs65/kg, in Lahore Rs65 to 70/kg, Rs66 in Peshawar and sugar touched
highs at Rs62 to 67/kg in Quetta.

To facilitate consumers, MOIP had announced to sell sugar at Rs 38/kg

through various branches of the Utility Stores Corporation (USC) across the
country, but it has failed to implement its own issued directives. The Utility
Stores Corporation outlets have increased the price of white refined sugar by
Rs 2 per kilo, without a formal notification from the Ministry of Industries and
Production (MOIP). In some USC outlets in the city, sugar was being black-
marketed at higher prices against the ones fixed by the government. The
managers at various stores put away the sacks of sugar at unknown places
from where it was black-marketed.

The ministries of commerce and industries have told the National

Assembly Standing Committee on Commerce the government cancelled the
Trading Corporation of Pakistan’s third tender for import of 50,000 tons of
sugar for building strategic reserves either on the directives of secretaries
committee or the Economic Coordination Committee (ECC). Chairman
Standing Committee on Commerce, Khurram Dastagir, in his observation
during a meeting said: “The government, instead of maintaining price
equilibrium in the open market, facilitated market manipulators.”

The Trading Corporation of Pakistan (TCP) has been directed to revise its
import schedule immediately so that the sweetener reaches Pakistan as
early as possible. "We have decided to complete white sugar import by April
instead of June as was the earlier decision," said one of the top officials who
attended the meeting in the Finance Ministry. The meeting with the private
sector, including central and provincial chairmen of Pakistan Sugar Mills
Association (PSMA) will be held on Friday (January 7). The sources said the
meeting had also decided to raise sugar price to Rs 50 per kilogram at utility
stores mainly to minimize difference in the prices of retail market and utility
stores. The meeting also decided to allow import duty-free import of one
million tons of sugar (0.5 white+ 05 million tons raw) by the private sector.
The sources said the TCP had also requested the government to allow it to
import one million tons of white sugar duty-free. TCP Chairman Saeed Khan
explained that the TCP had ordered the import of 0.5 million tons of sugar,
which after landing in Pakistan, would cost around Rs 62-63 per kilogram.

The consensus was that the TCP had already tendered 0.5 million tons of
sugar which must reach the country by February 2010 while another 0.5
million tons would needed to be positioned inside the country before the end
of the crushing season. In addition 0.5 million tons would be imported for
maintaining strategic reserves/buffer stocks as already approved by the
Cabinet. The USC would be additionally procuring 0.5 million tons of sugar
for intervention in the market through its outlets for the low-income groups.

The sugar production could be even higher since better variety crops had
been sown in 2009-10 as compared to previous years. It was underscored
that comparison of daily 'sugar recovery' for 2008-09 and the ongoing
season of 2009-10 on the same days were significantly lower for the current
season. Such a low recovery rate might lead to lower production of sugar is
an intriguing phenomenon.

(Business Recorder January 07 2010)

Social Impact of Sugar Crisis:

The sugar crisis is economic problem but now it is becoming more political
problem also. Every day people have to scarify their whole day just to get
Sugar. Majority in country is living under shadows of poverty. Many
consumers are those who just need 2 kg of sugar but they are refused at
subsidies stores. Many questions are being raised on our society that in what
kind of society we are living. There are many stakeholders involved in
producing, distribution of Sugar. Important are Sugar mills which are founded
and sustained through public resources. While the cost of the sugar industry
is largely borne by society but profits are appropriated by a handful of sugar-
mill owners. Here are the some ways how cost is born by society these are
highlighted by Dr Adeel Malik:

• Subsidizing sugar mills through loan defaults and debt write-offs this
subsidy amount is taken from people’s taxes

• Enabling the cultivation of sugar as one of the most water intensive

crops and by put ahead other agricultural possibilities

• Paying higher prices for sugar in the retail market

• Paying for the imports through scarce foreign exchange

• Financing subsidized provision of sugar through public revenues.

He further writes that “Pakistan's worsening food crisis exposes several

public actors, some for their active collusion and others for their passive
indifference – or, shall I say, criminal silence”.

The crisis shows that what are out ethical, religious, spiritual and moral
values. There is only thing is to maximize the profits without anything in the
view. The question which arise is still unanswered is; Can faith be defended
without protecting the livelihoods of vulnerable and oppressed masses?

Our political leadership and so-called “Civil Society” have shown its true
colors. It is perhaps the cruel indifference of our elites to this dilemma of the
poor that is most disturbing. The episode does not stop here; these
politicians have close political ties with the government. Some of politicians
directly own the Sugar mills which shows how hypocrite are our politicians.
Dawn newspaper (15/08/2009) states that these mill owners/wholesales
usually have strong political ties with the government (especially the PML –N)
or are in the government and are able to avoid any legal action. Faiz Ahmed
Faiz, famous Urdu poet of Pakistan described the situation in his following
famous verses;

“Banein hain ahl-e-hawas, mudda’ii bhi, munsif bhi

kise wakeel karein, kisse munsafi chahein”

According to Daily Nation (23/08/2009) political leaders or their relatives or

partners owned more than 50 per cent of these sugar mills. In this news
report they give details of ownerships. The mills said to be owned by
President Asif Ali Zardari’s family and PPP leaders are Ansari Sugar Mills,
Mirza Sugar Mills, Pangrio Sugar Mills, Sakrand Sugar Mills and Kiran Sugar
Mills. Ashraf Sugar mills are owned by PPP leader and incumbent ZTBL
President Ch Zaka Ashraf.

The mills owned by Nawaz family and relatives are Abdullah Sugar Mills,
Brother Sugar Mills, Channar Sugar Mills, Chaudhry Sugar Mills, Haseeb
Waqas Sugar Mills, Ittefaq Sugar Mills, Kashmir Sugar Mills, Ramzan Sugar
Mills and Yousaf Sugar Mills.

Kamalia Sugar Mills and Layyah Sugar Mills are also owned by PML-N leaders.
Former minister Abbas Sarfaraz is the owner of five out of six sugar mills in
the NWFP. Nasrullah Khan Dareshak owns Indus Sugar Mills while Jahangir
Khan Tareen has two sugar mills; JDW Sugar Mills and United Sugar Mills.
PML-Q leader Anwar Cheema owns National Sugar Mills while Chaudhrys
family is or was the owner of Pahrianwali Sugar Mills as it is being heard that
they have sold the said mills. Senator Haroon Akhtar Khan owns Tandianwala
Sugar Mills while Pattoki Sugar Mills is owned by Mian Mohammad Azhar,
former Governor Punjab. Jeffrey Paige in his famous book “Coffee and Power”
illustrates the picture in following words, “unprecedented wealth for the few
at the expense of the general impoverishment of the many”.

Reasons of Sugar Crisis in Pakistan

A man made crisis, which in fact is a monopoly to earn maximum profit
during peak consumption. Withholding supplies and increasing prices for
maximum profit has become a popular tactic. Pakistan, the world's largest
consumer of sugar, is facing a crisis because of a massive fall in domestic
production and a sharp increase in the price of raw sugar worldwide.

Growing Unapproved Sucrose

Sugar millers complain that farmers grow unapproved varieties sucrose

content thus resulting in lower sugar production and recovery rates. The
farmers have reportedly blamed the mill owners of not providing adequate
payments. Records state that the payments to the growers were delayed for
more than eight to ten months. This discouraged farmers from sowing sugar
cane and opt for growing wheat instead to avail attractive incentives.

Shortage of Irrigation Water:

The main reason of lower production of shortage of irrigation water shifting

of area to rice crop less use of DAP and non payment of dues to farmers on
time for last year crop. A study it revealed that more than 65 per cent
farmers have decreased the total area under cane production due to water
shortage, behavior of the mills’ management, late payments, increased input
cost, and diseases and rodent atta.

Most of the Sugar Mills are owned by Politicians:

Because the genesis of Pakistan's recurring sugar crises is essentially

political. If there is one industry that best reflects the underlying power
structure in Pakistan, it is sugar. The role of politics is central; from the
sanctioning of a sugar mill to its financing and operation. It is instructive to
take a look at the ownership structure.

Of the nearly 78 sugar mills, at least 50 per cent are owned by politicians or
their family members. They sit on all sides of the political divide, represented
in cabinet, treasury and opposition benches.

Confrontation between Growers and Millers:

Of late, there has been confrontation between growers and millers over
price. Growers demand higher price for their raw material and millers
complain about increase in production cost and imports.

Late Start of Crushing Season:

Late crushing causes dissatisfaction as well as financial loss to both farmers

and millers. Other problems are stagnant cane yield, non-payment of dues to
growers by mills, and low import parity price.

Constraints Faced by Growers:

Constraints faced by the growers are underweighting of cane at purchase

centers and mill gates, undue deductions by mills up to 10 per cent, delays
in payments, middleman, obtaining an indent, and the payment of premium.

Over Charging of Transporters:

Transporters, particularly trolley-owners also exploit mill owners by

demanding additional Rs250–300 per trolley during cane shortage, while a
delay in unloading at the gate incurs an additional Rs100 per day for trolley
along with the provision of food and tea for trolley drivers etc. by the mills.

Issuing of Export Permit to Mills:

The government intervenes by issuing export permits to mills, importing
sugar on public account and controlling retail distribution below the market
price through utility stores production. Sugar crisis persisted despite the fact
that some two million tons was produced and a huge quantity imported. The
country’s requirement is four million tons a year as against the supply of six
million tons produced by more than 70 sugar mills.

Effect of Uncontrolled Factors:

Consumption and demand play an important part as production depends

upon support price. The support prices of sugarcane affect the production
cost and uncontrolled factors such as weather and technology. The volume
of cane crushed is mainly related to production, milling capacity and prices
of cane and Gur.

Change in Price Elasticity:

Consumption relationship indicates the price elasticity for refined sugar as

four and income elasticity as eight in nominal terms. This implies that
relatively small change in cane supply causes more proportional increase in
sugar price. The purchasing of excess stocks from mills and delayed
payments to growers, and delay in crushing are bad aspects for the industry.

Failure of Policy Makers:

Another aspect of delay in crushing causes a negative impact on wheat crop

that replaces it in many fields across the country. Policymakers have failed
to realize the gravity of the situation. Instead of checking the price hike, a
free hand has been given to hoarders and profiteers, operators of the utilities
stores for forcing consumers to buy other items if they sought sugar at
controlled price.

Lack of Agriculture Policy:

The government has failed in adopting a proper agriculture policy. There is

no planning at any level for important crops, including sugarcane, and no
monitoring system.

Although, the government intervention is limited in keeping the prices at a

reasonable level but maintaining self-sufficiency in sugar production, static
yield and weaknesses in existing regulations are few problems facing the
industry.
An adequate supply to the TCP:

Sugar shortage was the main reasons that many sugar mills refused to sell
sugar to the TCP despite advance payments.
Chairman TCP Saeed Khan informed the committee that the agreement
made with the sugar mills in 2007 said that if the mills failed to provide
sugar to the TCP, they would pay back the original amount and a 25 per cent
penalty.

Lack of Government Strategies:

The fact that the issue is not new puts the blame falls entirely on the
incompetence of the Government. The lack of strategy to keep track of rising
prices .The failure of the Government to tackle the delayed payments and
hence less growth of sugar cane issue is to be blamed as well.

Despite the clear lack of strategy, the authorities seem to be more interested
in playing the blame game, instead of focusing on the problems. The Punjab
Government was the first to react after government announced an increase
sugar price, accusing the federal Government of not consulting the provincial
Government on the matter.

Burden of Tax on Sugar Mills Owners:

The Federal Board of Revenue (FBR) has decided to impose 16 per cent
General Sales Tax (GST) on ex-mill rate of sugar to bridge the gap of taxation
on per kg price. Punjab chief minister shahbaz shrarif appealed to federal
government to reduce the burden of sales and excise taxes on sugar
production.

Inadequate Accountability:

A ruthless accountability would make difference in having control over factor

resource their prudent distribution. Sugar industry and growers always stays
at odd relationship due to monopolistic behavior of mills owners rent seeking
behavior of hoarders which create powerful policies lobbies for huge profits.

Formation of Cartel among Mill Owners:

A cartel is a formal (explicit) agreement among competing firms. It is a

formal organization of producers that agree to coordinate prices; marketing
and production. Cartels usually occur in an oligopolistic industry, where there
are a small number of sellers and usually involve homogeneous products.
Cartel members may agree on such matters as price fixing, total industry
output, market shares, allocation of customers, allocation of territories, bid
rigging, establishment of common sales agencies, and the division of profits
or combination of these. The aim of such collusion is to increase individual
members' profits by reducing competition. Sugar mills owners make cartel in
order to maximize profit that’s causes low supply of sugar in market.

Solutions to Sugar Crisis in Pakistan

Reduction of Sugar Consumption:

Pakistan is the Asia’s third-biggest user of sugar. Daily Jang reports that “The
sweet obsessed Pakistani nation consumes sugar worth of Rs 200 billion
annually”. Sugar crisis could diminish by reducing the consumption of the
sugar.

Agricultural Reforms:

There is need for seed treatment in sugarcane cultivation. Agencies such as

research and extension department should be directed to enhance the
knowledge of growers through expression. Other Reforms can also be helpful
like improved fertilizers, proper irrigation, latest pesticides & insecticides,
etc. This will bring improvement in cane yield per hectare and will increase
the sucrose content. Such varieties will raise the output of Sugar as well.

Provision of Pre-Requisites for Sugar Industry:

For the last three years the sugar industry in Pakistan and especially Sindh is
facing an unprecedented crisis. This crisis has affected the three factors of
production, raw material suppliers, employees and owners equally. The
growers complain of not getting price which they demand, delay in payment,
employees are not getting the benefits which they used to get and
shareholders equity has eroded and converted into negative. Liquidity
problem being faced by the mills is so acute that in most of the cases, the
mills are unable to clear their legal liabilities. The banks are reluctant to
advance to the sugar mills in view of the general situation. Nine units are
likely to be closed viz. Bachani, Thatta, Dadu, Kiran, Lakana, Tharparkar,
Thar, Pasrur and Qaud Ghar. The cause of closure of these mills may be
lacking of initial capital, which is imperative for transaction. These mills
should be financed by the banks for continuing the operations. This step can
increase the output of sugar.

Lowering the Sales Tax:

The government should consider high rate of sales tax on food items,
especially in view that it is resulting in miseries both for the mills and the
growers. Long-term measures could also be suggested. However, this is the
time when the patient is to be taken out from coma and vitamins could be
suggested later on.

Importing Sugar & Curbing Smuggling:

The government should import one million tons of sugar (0.5 million white
sugar & 0.5 million raw sugar) to supplement demand and supply in the
market (An expert’s view in Jang Economic Session). Also, Competition
Commission of Pakistan’s member proposed that law enforcement agencies
should take measures to curb smuggling through porous borders.

Start of Crushing Season in Time:

If the sugar mills start crushing season on fixed date, its shortage will not
intensify. Late crushing causes dissatisfaction as well as financial loss to
both, farmers and millers. The timely start of crushing season could enable
the growers to cultivate wheat in time. He said since a past few years the
sugar mills take their start too late, causing delay in cultivation of wheat
because the wheat is to be cultivated on same land after harvesting of
sugarcane and in case of delay in harvest of sugarcane the farmers sow the
wheat crop too late, which is causing flour crises in the country.

Facilitating Growers:

PPP MNA, Nawab Abdul Ghani Talpur said that “the Prime Minister desires a
green revolution and for that purpose the government has launched
schemes like agriculture loans to farmers, free distribution of state land
among women peasants and Benazir Bhutto Tractor Scheme”. These
schemes will facilitate the farmer rather it will motivate the farmer to grow
more & thus will most probably lower the sugar crisis. Also, Demonstration
plots should be organized by the Extension Wing of Agriculture Department
at least on village level to disseminate information among the farming
community in an effective manner.

Management/Administration & Policies:

The Punjab government has badly failed to overcome worst scarcity of white
refined sugar here in the open market due to the mismanagement in the
supply chain, as the domestic consumers have become rolling stone in
search of the commodity. Policymakers have failed to realize the significance
of the situation. Instead of checking the price hike, a free hand has been
given to hoarders and profiteers, operators of the utilities stores for forcing
consumers to buy other items if they sought sugar at controlled price. The
government has failed in adopting a proper agriculture policy. There is no
planning at any level for important crops, including sugarcane, and no
monitoring system.

There is a need to appoint an “investigating committee” to investigate

the causes and suggest steps to revitalize the sugar sector. The committee
should consist of experts from the agriculture, marketing, pricing, industry,
sugar technology and the financial institutions.

The correct government policy would be to pave the way for boosting
agricultural and industrial production in the country and simultaneously
improve the marketing and distribution system, in order to ensure
availability of essential items to consumers at reasonable prices.

Role of Competition Commission of Pakistan:

The National Assembly Standing Committee for trade has said that the
current sugar crisis in the country is the result of collusion of ministry of
industries and production, trade and sugar mills owners. Also, the
Competition Commission of Pakistan (CCP) claimed to have found initial signs
of collusive behavior and cartelization among sugar millers in the light of
documents discovered during the search and inspection of the Pakistan
Sugar Mills Association (PSMA) Centre in Islamabad and PSMA Punjab Zone
office in Lahore the other day. The CCP has appointed two enquiry officers to
examine objectively all material/documents collected during search of PSMA
offices to determine as to whether or not there was cartel like behavior
and/or abuse of dominant position by the sugar mills’ owners and PSMA.

The CCP (Competition Commission of Pakistan) & the MCA (monopoly

control authority) can exercise their powers to stabilize the prices by
regulating the behavior of the firms that appear to form cartel (group of
firms acting in collusion to regulate the prices & production in the economy)
which might check sugar crisis.

Extinction of Middlemen ship:

Middlemen, who are actually agents or employees of the mill owners’

purchase sugar cane from small growers before the maturity of crop at rates
less than the support price & make undue profits by selling the same to the
producers at high prices. PSMA (Pakistan Sugar Mills Association) has
suggested the government of Punjab to bring a halt to the illegal, immoral &
unstructured involvement in the trade of sugar. It causes the price of sugar
to rise from 100 Rupees per mound to an unreasonable amount of 195
Rupees per mound.

Role of Trading Corporation of Pakistan:

The government's principal trading agency for sugar, the Trading

Corporation of Pakistan, should evaluate the domestic market situation
clearly in advance and advocate a policy for procurement, especially
regarding importing the stuff when our own millers get too petulant and
greedy; and if it receives clear instructions from the relevant cabinet
committee, it should necessarily have to comply.

Effective Governance:

Behind the crises of commodities, lies the crisis of system of governance in

Pakistan, which needs radical political power to change the system of
governance. There should be effective governance that is the hoarders when
deciding upon their course of action incorporate many factors, with the fear
of the law seeming to be nowhere amidst these.

Political Influence:
It is ironic that people are expecting the ongoing sugar crisis to be resolved
by the politicians who themselves are said to be the beneficiaries of this
situation since many of them own more than 50 per cent sugar mills of the
country. The Nation has reliably learnt that there were a total of 78 sugar
mills in the country and the political leaders or their relatives or partners
owned more than 50 per cent of these sugar mills.

Sugar Crisis in Government’s View:

While responding to a question about the ongoing sugar, energy and atta
crises, President of Pakistan Asif Ali Zardari said: “It is not in my purview and
it is not the President’s job to interfere in the affairs of the government of the
day. It’s the job of The Parliament and the provincial government and all this
is a provincial subject. If there is a weakness in provincial set-up, I hope the
federal government; provincial governments will look into it.”
 PPP leader and former finance minister Dr. Mubashir Hassan believed
that it was government of the rich people, by the rich and for the rich. Only a
people’s Government could solve crises of sugar, wheat, atta, electricity,
health and education, etc. He also said that government should set up sugar
mills in public sector to resolve sugar crisis on permanent basis. Dr.
Mubashir, who successfully tackled a similar sugar crisis in 1972 when he
was finance minister in ZA Bhutto’s cabinet, also suggested that government
should take control of sugar production, and sell the commodity in open
market at reasonable rates. Tracing the history of previous sugar crises in
the country, the PPP leader said that a severe sugar crisis hit the country
when he was federal minister for finance. The then Government, he said,
build 14 sugar mills in public sector to end sugar crisis for decades to come
and for the future governments to sell these factories at cheap prices to put
Pakistan at permanent risk of sugar shortage.

Ground Reality:
Our government takes notice and made another committee as-usual. But like
other problems this committee has nothing to do. Till now they are doing 0%
in this regard. As the other bundle of problem this issue will also be there in
our Parliament with no solution, our leaders are delivering debates and
protest against this issue, but they do nothing to resolve this problem. It is
hard to say that when we overcome this problem. We have to pray to our
Allah that He should have mercy on us, and gives us a good leader, who can
solve our problems. At last I like to end with the quotation “If Allah Almighty
gets angry with any nation, and then Allah appoints the bad leaders on
them”. So it is not only our leadership, but we have to change ourselves as
well.
References:
1. Causes of sugar crisis By: Dr Ali Muhammad Khushk and M. Ibrahim
Lashari

2. Sugar industry problems and solution By: M.A Siddiqui

3. Politicians, relatives own 50pc of country’s sugar factories By: Usman

Cheema

4. Allaunddin Masood, “Impact of sugar crisis, how the “game” was

played” Business and Finance Review Magzine, 24/8/2009
5. Board of Investment, “An Introduction to Pakistan’s Sugar Industry
2008”,Govt. of Pakistan
6. S.M. Alam, “Sugarcane production & sugar crisis” Economic Review;
Nov, 2007
7. Agriculture, Economic Survey of Pakistan 2008-09
8. Pakistan Sugar Annual GAIN Report 2008, USDA Foreign Agricultural
Service
9. Anjum Ibrahim “Ownership of sugar mills” Business Recorder,
07/09/2009
10. Dr Adeel Malik “Sugar and society” Daily Jang 16/09/2009
11. Sugar mills appear to operate like cartel By: Kalbe Ali

Websites:

www.nation.com.pk

www.jang.com.pk

www.thenews.com.pk

www.brecorder.com

www.asianfoodworker.net

www.pakobserver.net

www.geo.tv

www.fas.usda.gov

www.dawn.com