INTRODUCTION

The industry employs more than 100,000 labour force while more than 9 million
people of rural population are involved in the production of sugarcane. The
existing mills are sufficient enough to produce the country.s requirement of sugar
until the next three years. D!s should not entertain any application from
whosoever politician or otherwise for setting up a new sugar mill in the country.
"ather they should concentrate for financing of minimum wor#ing capital
requirement of $% operating mills, who are in dire need of such finance. &n
approximate amount of "s. '.% billion will have to be earmar#ed by the
commercial ban#s to finance for wor#ing capital requirement of these alive units.
(nfortunately, )a#istan.s sugar industry is mostly owned by political personalities
and ma*ority of the sugar mills were setup with the help of D!s normally trapped
with the wor#ing capital crisis. +onsequently, some of the mills have already been
closed and it is feared that some more sic# units will also close down. & collapse
of sugar mill is a loss of national assets, reduction in the sales tax revenue and an
increase in unemployment.
,oss of production of refined sugar due to excess quantity of raw cane diverted for
seed and -ur manufacturing ./%0 instead of '102 wor#s out to 34','$9 tons that
could have made available possible a total sugar production of ',911,$// tons both
from cane and beet. (nder such avoidable circumstances, the country could have
needed to import only about 11/,14% tons, which might result to save precious
foreign exchange of approximately 5 '04.4/0 million. &dvance planning to
foresee the situation for the previous year and control of proper utili6ation of
cultivated sugarcane could have easily avoided the current sugar bonan6a.
The -overnment should ta#e up cost studies at the growing sugarcane stage for
the purpose of fixing the support price for the growers. +ost studies for production
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of refined sugar both in terms of variable cost and fixed cost of production in each
sugar mill, should also be underta#en to control the retail prices. +ost audit rules
and compulsory maintenance of cost accounting records for sugar industry, in line
with the international cost accounting models in other countries of the world, will
prove to be a great help in this direction.
The net amount of foreign exchange amounting to "s. %.109 billion saved as a
result of total exports of "s. 19.%%' billion during the last six years from 1993 to
1999 has been eaten away by the import of 900,000 tons during the current year
19997'000 estimated to cost "s.1/.109 billion to the government exchequer.
8ith the proper utili6ation of poor cane crop for the season '000 . 01, the situation
for shortage of sugar may be reduced to 3$1,$10 tons, which needs a foreign
exchange of (9 5 113 million.
The situation would be worse and get out of control if /%.10 of cane production
for the on7going season is diverted for seed and -ur manufacturing instead of '10
estimate for which a hefty foreign exchange of (9 5 '31 million will be needed to
import 9%',43/ tons. The -overnment should impose restrictions on excess
production of -ur equivalent to 1'.10 of sugarcane production.
9ince de76oning, the incentive of sugar mills to direct resources for development
of good variety cane in its area has almost diminished because the grower who
have borrowed money from a sugar mill for development is free to ta#e his
sugarcane to any mill irrespective of which mill advanced the loan for
development. !t is also one of the causes of sic#ness of sugar industry. ,arge
interest of the growers of the area and those associated with such pro*ect, which
collapses due to non7availability of cane is badly affected. +losure of a sugar mill
reduces -D) and increase poverty of masses.
'
LITERATURE REVIEW
9ugarcane is the fourth largest cash crop grown in )a#istan which contributes to
the agriculture economy the crop value of "s. 34,'9' million. & %4 per cent of this
sugarcane was utili6ed and crushed by %/ sugar mills for the season 1994799,
producing /.1/1 million tons of refined sugar which was capable to contribute
substantial amount to the federal government revenue towards sales tax and road
cess for )rovincial government revenue. The industry employs more than 100,000
labour force while more than 9 million people of rural population are involved in
the production of sugarcane.
The sugar industry, which is the second largest in the country after textiles, has a
potential of great economic significance for the country. !n )a#istan normally
season starts in :ovember and ends in &pril while in ;ambia it starts in &pril and
finishes in December.
!n )a#istan %$ 9ugar <ills are operating having crushing capacity of /$1,/00 tons
of cane per day .T+D2. 9even 9ugar mills extended capacity but they are unable to
utili6e. =ased on 1$0 days season these sugar mills have a total crushing capacity
of 14 million tons of sugarcane capable to produce 1 million tons of refined sugar
and / million tons of molasses.
!n order to enable the country to be self7sufficient in sugar, a minimum area of
1.110 million hectares should remain under sugarcane cultivation, which can
produce 10 million tons at an average yield of 3/.4$ tons per hectare. The
-overnment should insure that at least %$0 of the sugarcane grown in the country
is utili6ed by all sugar mills. !t means that a total of /4./ million tons if
compulsorily utili6ed by the mills can easily produce white refined sugar of /./
million tons per season at an average sucrose recovery of 4.$'0. )a#istan present
population is 1/.1 million head count. 8ith an average growth rate of '.10 per
/
annum, the population of the country will grow year to year as shown in graph and
table !. The per capita consumption of sugar in )a#istan is about '' #g. The
estimated domestic consumption is provided in table ! and graph !&.
PROBLEM STATEMENT
(nfortunately, )a#istan.s sugar industry is mostly owned by political personalities
and ma*ority of the sugar mills were setup with the help of D!s normally trapped
with the wor#ing capital crisis. +onsequently, some of the mills have already been
closed down and it is feared that some more sic# units will also close down. &
collapse of suar mill is a loss of national assets, reduction in the sales tax revenue
and an increase in unemployment. !t is the prime responsibility of entrepreneurs to
arrange for wor#ing capital required for smooth start and uninterrupted production
during a season. & minimum cash of "s. 30 million is required to rotate the
crushing and production cycle in the first month of a season. 9etting up a pro*ect is
one thing, which in most cases, is financed by D!s, but availability of wor#ing
capital is the life blood for a pro*ect. 9ome companies prefer to use the option of
borrowed funds both from commercial ban#s and by way of using suppliers.
credit, which does not help the company in long7term survival of the pro*ect.
&vailability of the wor#ing capital plays a critical role.
!mprovement in sugarcane yield per hectare, increase in sucrose content,
maximum utili6ation of plant capacities and, above all, availability and efficient
use of wor#ing capital will help the country in the production of surplus sugar
during the next three years as shown in table !.
,oss of production of refined 9ugar due to excess quantity of raw cane diverted
for seed and -ur manufacturing ./%.10 instead of '102 wor#s out to 34','$9 tons
that could have made available possible a total sugar production of ',911,$// tons
3
both from cane and beet. (nder such avoidable circumstances, the country could
have needed to import only about 11/,14% tons, which might result to save
precious foreign exchange of approximately 5 '04.4/0 million. &dvance planning
to foresee the situation for the previous year and control of proper utili6ation of
cultivated sugarcane could have easily avoided the current sugar bonan6a.
RESEARCH METHODOLOGY
!n )a#istan around %00 of the molasses produced is exported. During the last 1'
years from 1944 to 1999 a quantity of 1' million tons of molasses exported
valuing more than "s. 1$ billion. This shows that sugar industry exports about >ne
million tons of molasses earning a foreign exchange of "s. 1./ billion per annum.
The remainder of molasses is used for industrial alcohol and poultry feeds. The
byeproduct of molasses, is exported in raw as well as processed form. The
processed form of molasses is industrial alcohol. )a#istan had made export of
fermentation ethyl alcohol .not denatured2 of %1 million litres valuing "s.%14
million during the last 1'7years from1944 to1999. rom these statistics we can say
that sugar industry exports $ million litres valuing average forex earnings of "s.$0
million per annum.
!f all molasses is converted into alcohol, the country could earn more foreign
exchange through its exports? or if blended with gasoline will provide gasolhol,
which may reduce oil import bill to some extent.
Those sugar mills who were in operation in the previous season are also striving
hard for wor#ing capital finance for purchase of cane and initial start up expenses
for the cane crushing. 9ome of the sugar mills are forced to ma#e agreements with
the middlemen who would purchase sugarcane from the growers at the rate of
"s./$ per 30 #g on commission basis and sell it out at the rate of "s.30 to "s. 11
to sugar mills. 9uch middlemen also receive commission from cane growers and
pay to poor growers lesser than the support price.
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This situation would definitely increase the ex7factory cost of sugar production,
which may be avoided if sugar mills are provided initial wor#ing capital finance
by the commercial ban#s. !t happened for the first time in the history of )a#istan
that sugar an essential commodity for human consumption as well as
pharmaceutical products and other commercial usages is sold at very exorbitant
rates ranging from "s. '% to "s. 30 per #ilogram. &s compared to this, the retail
price of sugar in !ndia is not more than "s. 14 per #ilogram. >ne of the ma*or
reasons for the shortfall in sugar production is -ur manufacturing. The demand of
-ur has increased for the last five years due to influx of &ghan refugees who use
-ur for meeting their nutritious requirement. =ut it should be noted that whitened
-ur is in*urious to the health of human body due to use of unapproved chemicals
to change the colour of -ur to whitening.
IMPORTANCE
9ugar industry.s share during the last five years from 199$ to '000 was
"s.'39,$'9 million in large scale manufacturing of "s. 1,/93,3$1 million, which
in term of average percentage is 140. )a#istan.s total -D) at mar#et prices for
these five years was "s.1/,/$3,0%4 million, out of which sugar industry.s average
contribution was 1.90. These indicators clearly show the incredible performance
of sugar industrial sector performance in national economy. @ear wise indicators
are provided in table !A.
Bard ground reality is that under the limiting economic factors affecting the sugar
industry such as area under cultivation, lower yield, low sucrose recovery
compounded by the arrear of cane growers payments, increasing trend of closure
of sugar mills owing to multiple causes, lac# of wor#ing capital finance and above
all diverting a big portion of cane production for -ur manufacturing, it appears
very difficult to meet the domestic requirement.
$
Bowever with the proper utili6ation of poor cane crop for the season '0007 '001,
the situation for shortage of sugar may be reduced to 3$1,$10 tons as computed
under prospects and failure and will definitely be met by importing this sweetener
commodity at the high international price of 5 '34 per ton which needs a foreign
exchange of 5 113 million. The situation would be worse and get out of control if
/%.10 of cane production for the on7going season is diverted for seed and -ur
manufacturing instead of '10 estimate and decline of sucrose content from
average recovery of 4.$'0 to 4.//0 as witnessed during the previous crisis season
19997'000. !n that case shortfall of white sugar has been wor#ed out to 9%',43/
tons for which a hefty foreign exchangeof 5 '31 million will be needed to import
the sugar to feed a population of 130.93 million during the year '000701.
FINDINGS AND SUGGESTIONS
a2 =alanced policy for cultivation of four ma*or cash crop . wheat, cotton, rice and
sugar. &n incentive should be provided to the growers for cultivation of sugarcane
on 1.110 million hectares.
b2 !ndian variety of seed which has totally degenerated and diseased affect the
production yield should be avoided. !nstead the government should import
highyielding varieties of sugarcane from other countries for averting any sugar
crisis in the future.
c2 The government should ma#e a publicity campaign for minimi6ing use of -ur
so that a substantial quantity of cane becomes available for crushing and ma#ing
white spoon sugar.
d2 The 9tate =an# of )a#istan should earmar# a sum of about "s. '.% billion and
direct all commercial ban#s to finance wor#ing capital requirement of operating
sugar mills in every season through proper and vigilant loaning methods.
%
e2 9ales Tax C 110 is fixed on ex7factory price of "s. 13 per #ilo in case of
supplies to registered person. & move to charge the sales tax on the price other
than the fixed price of "s.13DE will further create problem for the consumers
whose purchasing power is already very low due to industrial sluggishness and
stagnant economy. !t is suggested that sales tax should not be charged on mar#et
price.
f2 The -overnment should impose restrictions on excess production of -ur
equivalent to 1'.10 of the expected cane production of 30.$13 million tons
from the current year crop '000E'001 to reduce the shortage of sugar in the
country as well as earn sales tax revenue of more than one billion "upees.
g2 The support prices of sugarcane can not wor# at all through the free mar#et
forces due to the simple reason that retail price of sugar is controlled by the
-overnment and further, the support prices of other cash crops such as wheat, rice
and cotton are also fixed by the -overnment. Two economic theories .12 principle
of supply and demand governed by mar#et forces and .'2 -overnment control of
retail price can not wor# together and will further widen the sugar crisis in the
country.
h2 The provincial -overnments should fix the support price of "s.30 per 30 #g for
purchase of sugarcane at the factory gate as well as at the cane purchase centres
under section 1$ of the 9ugar actories +ontrol &ct, 1910.
)lease refer to your discussion on the above sub*ect. !ndeed it is a matter of great
pleasure for me to write a research7based article on sugar industry.s crisis
prevailing very dangerously these days, which has engulfed the agro7based
industrial sector. armers have started burning their standing cane crops. Fvery
day sugar mills are being closed after sustaining of colossal losses in the initial
heating of boilers with furnace oil. The -overnment has adopted two parallel
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economic theories, which will further widen the crisis. The situation is so burning
that is very difficult to control simply due to lac# of planning and vision for the
on7going season. The blunder mista#e was that sugarcane support price was not
increased by the -overnment and let this governed by the free mar#et forces while
Fconomic +oordination +ommittee .F++2 has been trying to control the retail
price of sugar by import.
RECOMMENDATIONS
+ane variety evolution wor# is carried out at the -overnment "esearch !nstitutes
established at aisalabad .)un*ab2, Byderabad G Thatta .9indh2 and <ardan
.Hhyber )a#htun#hwa2. )rivate sector .9ha#argan* I Jhang2 has also stepped in
this wor#. This may be noted that 9ugar +ane "esearch !nstitutes in )a#istan have
no cane breeding programme of their own. +ane fu66 .true seed2 of un7#nown
characters is imported from various available resources, which could be (9& or
&ustralia. 9ince supply of fu66 depends on donor country and un7assured funds
availability, variety selection programme is not consistent. "esearch institution in
public sector is mostly starved of funds and private sector is not that serious. +ane
varieties evolved at various "esearch !nstitutes in )un*ab, 9indh and Hhyber
)a#htun#hwa, during 19%$7'00$.
&mongst the three cane growing provinces of )a#istan, )un*ab is leading in cane
variety evolution programme. 9ugar cane "esearch !nstitute, aisalabad has
released a number of varieties since its inception. 9ha#argan* "esearch !nstitute,
Jhang has also an active variety selection programme and has evolved one variety
as 9)9-'$.
+ane varieties in cultivation areK
9
+) '3', B9 '30, 9) '/3, +) '1/, +) '/%, +oJ 43, +o1134, 9) '/4,
+)%%7300, +)3/7//.
The varieties +o 1134, +oJ 43, and 9) '/4 are late maturing low sugar varieties,
9) //4 gained popularity and spread at fast rate. !n some of the sugar mills this
variety brought down recovery level to around %74 percent. !ndustry is trying to
get rid of this variety, but in cane slump years sugar mills do not stic# to their
policies and allow procurement.
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REFERENCES
1. L=eryllium7+opper <9D9L. csunitec.com. "etrieved '01170$71%.
'. ^ &rticle on sugar centrifugals, retrieved on 9eptember %, '010
/. ^ Description of cooling crystalli6ation
^ article on centrifugal controls, retrieved on &pril '/, '011
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