The sugar industry in Pakistan has been in turmoil for the past several years, with problems ranging from pricing disputes to production volume decline to outright disagreements resulting in mills halting all purchasing and shutting down factories.
In addition, the average retail price of sugar in the country leaped from PKR64 (US$0.41) to PKR74 (US$0.48) per kilogramme in January this year, a significant rise from 2017-2018 when the average retail price per kilogramme stood at PKR 53.75 (US$0.35).
One other major industry issue was that of millers purportedly delaying making any sugarcane purchases from growers, as the crop decreases in weight the later it is harvested after October (as mandated by law), and growers are paid as per the weight they sell.
Sugarcane harvested in December to January has about 20% less water (hence less weight) but the same sugar content - meaning higher profit margins for millers if they wait the extra one or two months.
In order to deter this, as well as other cases of the supposed ‘bullying’ of growers by the millers, Punjab submitted a legal amendment to the Sugar Factories Control Act earlier this month, which once enforced would significantly raise the fines for all related violations.
According to Tribune, the maximum penalty for violations such as purposeful delays or deliberate wrongful weighing of the sugarcane would be raised to PKR5,000,000 (US$32,400) from the current PKR50,000 (US$324), and the minimum penalty would be set at PKR1,000,000 (US$6,470).
All repeat violations would be fined a minimum of PKR5,000,000 (US$32,400).
“[Delaying] issuance to farmers, making illegal cuts, carrying out inappropriate weightage, posing hindrances in offering accurate and timely information to the government, hoarding sugar stocks and selling it at prices higher than the ones fixed by the government [will] result in jail time,” the Punjab provincial government said.
For offences that warrant imprisonment such as those above, maximum jail time would be raised from one to three years.
All violations that fall under this act, whether big or small, will no longer warrant bail.
Minimum price
The battle between the millers and growers has been raging on for some years, with the minimum price of sugar one of the major factors at the epicenter of this tiff.
According to Section 16 (iii) of the Sugar Factories Control Act, “The Provincial Government, after consultation with the Sugarcane Control Board, [will] determine [the] minimum price to be paid by occupiers of factories or purchasing agents for cane purchased in that area.”
For the past six or seven years, minimum prices were set for Sindh and Punjab (where Pakistan’s sugarcane mills are primarily located) at PKR180+ (US$1.16+), but discord emerged as both millers and growers protested this amount – for very different reasons.
Farmers began pushing for higher minimum prices (PKR250/US$1.62 per 40kg, according to Dawn), whereas millers unsurprisingly argued for a lower rate.
“The government [has not taken] the ex-factory per kilogramme price of sugar into consideration,” Pakistan Sugar Mills Association (PSMA) Sindh zone chairman Dr Tara Chand said.
“Millers don’t object to a reasonable hike in price, but given the constraints of ex-factory prices, the sugar industry resists the [current] price.”
When the minimum price was set at PKR225 (US$1.46) last year, sugarcane mills went on a ‘strike’ of sorts – the Tribune reported that multiple members of the Pakistan Sugar Mills Association had ‘colluded’ to close their mills and not accept any sugarcane crops from growers, significantly contributing to the already rapidly-rising sugar prices in the country.
Other means
In response to the crisis, Pakistan Prime Minister Imran Khan has stopped all sugar exports from the country and approved the importation of 300,000 tons of sugar via the private sector – marking the first time Pakistan has needed to import sugar in some eight years.
“At the same time, all the relevant government agencies have begun doing an in-depth probe into the flour & sugar price hikes,” said Khan via his Twitter page.
“The nation should rest assured that all those responsible will be held accountable and penalised.”
