Sugar industry – what actually needs to be done

Let’s agree on one thing first, profit making is NOT wrong.  Businesses are established with one sole objective which is to make profit.  One of the most important objectives of the board of directors of a public limited company is to maximize the share value of their shareholders which happens thru profit making.  It is thru profit making that businesses accumulate capital, make investments, start new industries, provide employment to people, pay taxes and contribute to the overall economy.  So, when talking negatively about profit making one should be careful.

What is bad though is unethical and illegal profit making.  But then everything that is unethical or illegal is bad not just profit making.  So, when one speaks about profit making one should clearly focus on the unethical and illegal part and should clearly separate the same from ethical and legal profit making which actually is good and badly needed for each and every organization and country.  Even a not for profit organization can not sustain without profit making.

The reason we need to classify and segregate legal and illegal profit-making is because of the highly talked about sugar industry for past few weeks.  Before commenting any further let’s review some facts about this sugar and its industry.

Sugar is considered an important and popular commodity in Pakistan so much so that its price changes are generally felt by the masses.  Not only with masses, apparently, sugar is also important and popular in the power corridors as well, as lot of those who walk thru those corridors grow sugarcane, produce sugar and earn hefty profits from the sale thereof.

The way it is handled in Pakistan sugar is considered to belong to same category of commodity that includes wheat, maize, corn, flour, rice and pulses.  But is that really the case?  Almost all the commodities mentioned earlier are considered staple food and make an almost unavoidable part of food for different groups of people, depending on their preference or affordability.  Sugar is not a staple food.  It is an added ingredient like salt.  It adds taste to our food and some foods would become useless without sugar.  Not that it would taste good but any food that has sugar as an important ingredient can be eaten without sugar as well. Though a big and complete industry of sweets and desserts would either not exist or loose its attraction if some kind of sweetener, such as sugar, not added.

• Major source of sugar in Pakistan is sugar cane
• Sugar cane growing area in Pakistan for 2018-19 was 1.1 million hectares
• In the year 2018-19, 67 million tons (67 billion kg) sugar cane produced
• Pakistan has 90 sugar mills
• Ex-mill price of sugar was Rs. 59.05/kg
• Pakistan ranks 7^th in world in sugar production
• In the year 2018-19, 5.3 million tons sugar produced
• Per capita consumption of sugar in Pakistan for 2018-19 was 25 kg/year
• Sugar makes 1.9 % of GDP
• Pakistan exported 1.1-million-ton sugar in 2018-19
• Sugar Price in international market was $334.39 per metric ton (Rs. 42/kg in equivalent Pakistani Rupees @ US$1 = Rs. 125)
• From sugar exports Pakistan earned $368 million
• Pakistan earned $900 million from export of sugar and ethanol combined in 2017-18
• Sugar and ethanol combined exports in 2017-18 was 3^rd largest only behind cotton and rice
• Overall sugar industry provides employment to almost 1 million (not verified) people directly or indirectly

Source:  Pakistan Sugar Mills Association Annual Report 2019

From the above one can see that with respect to the size, production, consumption, export, employment and everything sugar industry is huge and has a significant role in overall economy of Pakistan.  Further this is an industry that from one end to another is almost fully indigenous.  Raw material is grown locally, factories are designed and engineered locally, uses mostly local equipment, local engineers and skills men install, erect and operate the factories, even the packaging and supply chain also uses mostly local resources.

Do we want to harm such an important industry and convert its successes into failures?  But trust me, exactly the same thing may happen if we continue running breaking news and making headlines so carelessly and negatively about the overall industry without considering the potential impact on and damages it may cause to the whole industry.

Intelligent nations talk about the important and sensitive matters very carefully and discreetly.  Yes, sugar industry has issues that need to be looked at and need to be addressed.  But the focus should only be on the negative issues, with an intent of resolving the same, not on tarnishing the whole industry and/or putting bans.

What needs to be done is:

By the government:

• Strictly control all illegal activities happening on fixing the sugarcane minimum price
• Strictly control all illegal activities happening in getting export subsidies
• Strictly control all political interference happening in sugar related policy decision making
• Strictly control all illegal activities happening in hoarding and black-marketing of sugar
• Strictly control all illegal activities related with tax evasions
• Get a comparative analytical study prepared to compare growing and production of Cotton vs Sugar
• Introduce a strict and long-term policy following the recommendations of the above study
• Explore export marketing opportunities for turnkey sugar plants

By the sugar mills managements:

• Revisit and make the existing business and technical processes more efficient
• Reduce sugar’s cost of production to compete in the international market
• Eliminate all involved in Illegal activities related with sugar cane purchasing
• Eliminate all involved in Illegal activities related with sugar hoarding and black-marketing
• Eliminate all involved in Illegal activities related with tax evasion
• Keep the business growing and prospering fairly

By you, me and all others

• Report and write responsibly
• Focus on issues not individuals
• Stop tarnishing the whole industry due to few black sheep
• Stop paying attention to the news not supported by authentic and verifiable sources
• Contribute also not just criticize

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Babar Saeed

bsaeed@yahoo.com

April 29, 2020