SUGAR CRISIS IN PAKISTAN

“The accouterments of [Pakistan's] state power and prestige ring hollow when people are dying in their search for food”1

Unending lines, deafening noise and unruly crowds at subsidized sugar outlets, often they

fight with one another or outlet staff and keeping all ethics aside go crazy and wild. The

situation sometime forces the police to baton charge or scatters them with tear gas. The

scenario shows that these ordinary people are not human rather they are animals. This is

not a scene of Somalia or Afghanistan but it is welcoming of holy month Ramadan in

Islamic Republic of Pakistan. The consumer shows craze for a scare commodity that is

“Sugar”. This consumer craze is not only result of artificial shortages but also help the

producers to earn handsome profits. Th e

The people of Pakistan don’t have power, gas, sugar, water, jobs, money, food, security

and hope yet they continue sacrifice for a better tomorrow. We witness every year when

Ramdan approaches, essential commodities either are in short supply or become

expensive. With each passing day, hoarders and profiteers increase their profits by

artificial hoarding of daily commodities. Now again in this Ramdan hoarders and

profiteers, almost all of them Muslims, have once again created a fake shortage of

commodities from the market. The flour and sugar are the main commodities which are

daily used and a must for every Pakistani. We have seen recently flour crisis in Pakistan,

but that is now somehow controlled yet sugar crisis continues unstoppable and has added

to the hardships of masses. This crisis has exposed government’s inability and

incompetence in handling a national crisis. The sugar price was raised by 55 per cent

without any justification just to satisfy the unquenchable greed of mill owners at the

expense of consumers. We will see the sugar industry and roots of this crisis in detail in

this article.

Sugar Industry in Pakistan The sugar industry plays an important role in the economy of the country. It is the second

largest industry after textiles. The sugar sector constitutes 4.2 per cent of manufacturing.

1 Daily Dawn Editorial, 16/08/2009

In size, the sugar sector almost matches the cement sector2, however, it’s many backward

(sugarcane growers) and forward linkages (food processors) in the economy indicate that

its indirect socio-economic impact in overall terms is significantly larger than its direct

contribution to GDP.

At the time of independence in 1947, there were only two sugar factories in

Pakistan. The output of these factories was not sufficient for meeting the domestic

requirements. The country started to import sugar from other countries and huge foreign

exchange was spent on this item. Need was felt to increase the production of sugar.

Keeping in view the importance of sugar industry, the Government setup a commission in

1957 to frame a scheme for the development of sugar industry. In this way the first sugar

mill was established at Tando Muhammad Khan in Sindh province in the year 1961.3

Table 1: Key Facts of Sugar industry of Pakistan, BOI Govt. of Pakistan

Currently Pakistan is the 5th largest country in the world in terms of area under sugar

cane cultivation, 11th by production and 60th in; yield. Sugarcane is the primary raw

material for the production of sugar. The sugar industry in Pakistan is the 2nd largest agro

based industry comprising 81 sugar mills with annual crushing capacity of over 6.1

2 Allaunddin Masood, “Impact of sugar crisis, how the “game” was played” Business and Finance Review Magzine, 24/8/20093 Aslam Memon, "Sugar Industry in Pakistan", Pak Economics, Sep 23 - 29, 2002

No. of Mills 81

Crushing Capacity 6.1 Milluion tonesContribution to Economy

Share in GDP Employment Total Investment

3.0 – 4.0 Million Tonnes1.9%1.5 million (directly & indirectly)PKR 100 Billion (Approx)

Average Yield Per Hector 46.8 Tonnes

Total Cane Production 45.0 – 55.0 Million Tonnes

Cane Available 30-43 Million Tonnes

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

Per Capita Consumption 25.8 kgs.

Contribution to exchequer Rs. 12.16 Billion

million tones. 4 According to Ministry of Industries and Production; total crushing

capacity of the Sugar mills is about 505,000 tonnes per day. The average capacity

utilization of the sugar mills during the last five years remained 70% to 74%.

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.

Sugar Production in Pakistan

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 is an important source of income and employment for the farming community

throughout the year. 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.

Sugarcane is grown on over a million hectares and provides the raw material for

Pakistan’s sugar mills. Its share in value added of agriculture and GDP are 3.4 percent

and 0.7 percent, respectively. 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%.5

Sugarcane production is cyclical as the interests of farmers and industry is often at

odds. Industry procurement practices such as delaying the crushing season, buying cane

at less than the support price, short weight, false deductions and delayed payments reduce

4 Board of Investment, “An Introduction to Pakistan’s Sugar Industry 2008”,Govt. of Pakistan5 S.M. Alam, “Sugarcane production & sugar crisis” Economic Review; Nov, 2007

returns to farmers. Sugar millers complain that farmers grow unapproved varieties with

low sucrose content, thus resulting in lower sugar production and recovery rates. 6

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.7

The following table shows the area cultivated production and yield for sugarcane

production. In this also we see the comparison of last five years;

Table 2: Area, Production and Yield of Sugarcane, Economic Survey of Pakistan 2008-09

According to Annual report 2009 of PSMA the reason is 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. For the year 2009/10 sugarcane production is

forecast at 53.6 MMT, an increase of 4 percent over the previous year due to an expected

increase in area and yield. A shortage of cane supply during the current crushing season

led to an increase in cane prices. This situation benefitted growers who received prices

higher than the indicative prices announced by the Government. This development is

expected to contribute to an increase in sugarcane area and productivity in the ensuing

6 Pakistan Sugar Annual GAIN Report 2008, USDA Foreign Agricultural Service7 Agriculture, Economic Survey of Pakistan 2008-09

year. Moreover, last year’s higher production of rice and sunflower led to lower prices

received by farmers, thereby encouraging the switch back to sugarcane.8

Consumption trends of Sugar

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.

In the last four decades, per capita calorie intake in Pakistan has grown from

1750-2450 (kilo) calories with an average annual growth rate of 0.90%. Nevertheless,

20% of Pakistan's population is still undernourished. 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 is forecast at over 4 million

tons.

Sugar Crisis Reality!

The recent sugar crisis in Pakistan materialized because of this 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

8 Pakistan Sugar Annual GAIN Report 2008, USDA Foreign Agricultural Service

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.”9 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.

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 al

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.

However 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

9 Anjum Ibrahim “Ownership of sugar mills” Business Recorder, 07/09/2009

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.”10 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, TCP 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.

We have seen how the mismanaged by the government on this important issue.

Again profit margins of capitalists not touched rather public expenses used. On 17

August, 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.11

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

10 Anjum Ibrahim “Ownership of sugar mills” Business Recorder, 07/09/200911 Anjum Ibrahim “Ownership of sugar mills” Business Recorder, 07/09/2009

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 Malik12;

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”13. 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. In the midst of such chronic food insecurity, the goodness of our elites is at its

full display during Ramadan. Then we have the president and prime minister holding

lavish if tar parties in their lawns. 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.

12 Dr Adeel Malik “Sugar and society” Daily Jang 16/09/200913 Dr Adeel Malik “Sugar and society” Daily Jang 16/09/2009

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”

Solving the Crisis:

Incomplete………………………..

Conclusion

Incomplete………………………..