TABLE OF CONTENTS

LETTER OF ACKNOWLEDGMENT Pg No: 2

HISTORY OF SUGAR INDUSTRY Pg No: 3

PAKISTAN SUGAR INDUSTRY Pg No: 4

INTERNATIONAL PERSPECTIVE Pg No: 5

INTERNATIONAL SUGAR MARKET Pg No: 6

PAKISTAN INTERNATIONAL SUGAR MARKET Pg No: 10

SUGAR CRISIS Pg No: 17

INTERVIEW WITH STORE OWNER Pg No: 23

SWOT ANALYSIS Pg No: 24

RECOMMENDATIONS Pg No: 25

BIBLOGRAPHY Pg No: 29

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1. LETTER OF ACKNOWLEDGMENT

11TH DECEMBER, 2010Mr. Qazi MuhammadFaculty of EconomicsIoBMKorangi Creek, Karachi-75190

Dear Mr.Qazi

We are pleased to submit our report on Sugar Industry of Pakistan.

We are truly indebted to Mr. Qazi Muhammad Adnan Hye for giving us this incredible opportunity to gain exemplary experience in analyzing the Pakistani industries. He showed commendable gesture of believing in our ability and guided us throughout the completion of this report. He had faith in us which helped us overcome all the difficulties and developed passion to the subject with regard to the report.

We appreciate having this assignment. If you need any assistance in interpreting this report, please feel free to contact at ammararif95@hotmail.com;spangle_night@hotmail.com; yoosha.g@gmail.com and hope to receive assignments from you in the future.

Sincerely yours,

M.AMMAR ARIF NAKHUDA (7790)ABDUL SAMAD (7881)YOOSHA ABUL HASSAN (7959)

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2. HISTORY OF SUGAR INDUSTRY

Sugarcane is an important cash crop of Pakistan. It is mainly grown for sugar and sugary production. It is an important source of income and employment for the farming community of the country. It also forms essential item for industries like sugar, chip board, paper, barrages, confectionery, and use in chemicals, plastics, paints, synthetics, fiber, insecticides and detergents

At the time of Pakistan's independence in 1947 there were only two sugar mills in the country with a total production of 7,932 tons during the season of 1947-48. Then during 1997-98 there were 75 sugar mills in the country producing 2.4 million metric tons of sugar.

Apart from the four mills located in the North West Frontier Province which were based on sugar beet, all others used sugar cane as the raw material. Most of the mills were situated in agricultural areas, close to sugarcane fields, from where raw material is procured.

A number of chemicals including lime, sulphur, phosphoric acid, bleaching powder, poly-electrolyte, floatation aid, and decolourant, are used in sugar making process. The quantity of these chemicals varies from mill to mill due to different type of processes.

Sugarcane production in the country has increased over time. In 1988, the area under sugarcane was 878 x 103 hectares which increased to 886 x 103 hectares in 1992 and sugarcane production increased for 36976 x 103 tons in 1988 to 38059 x 103 tons in 1992. Despite expansion in production over years, increase in the productivity per unit of area has been very low in Pakistan. The average sugarcane production in the country required static between 45-50 tons/ha, which is very much low compared to the cane production by other countries.

Available Sugarcane Tissue Cultured Varieties:

1. CP-43-33 8. BL - 42. CP- 77-400 9. T - 103. CP 81-14354. ABT super5. BF - 162

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6. SPSG - 267. SPF - 2

3. PAKISTAN SUGAR INDUSTRY

Today there are 82 functional sugar mills in the country out of which 45 are in Punjab, 32 in Sindh and 5 in Khyber Pakhtonkhwa. The total sugar production capacity is 6.8 million tons in a season and about six hundred thousand (600,000) tons per day. Capacity utilized is 60‐70% depending upon sugarcane production. In the current crushing season 2009‐10 a total quantity of 3.1 million tons new sugar has been produced in the country nearly achieving the target estimated production level of 3.1 million tons. However, the annual consumption is 4.2 million tons thus the balance of 1.1 million tons is being imported to meet the gap.

In Pakistan about 99% of the sugar is extracted from sugarcane. In favorable years there is more sugar production than the requirements and in adverse years the country falls short resulting in imports. It has been reported that there has been no fruitful improvement in the country's economy during the last 15 years for the simple reason that the people concerned traders, industrialists and other organizations were not taken into confidence, while formulating policies. The global situation of agricultural products is declining due to urbanization, increase in population and unfortunate natural calamities. Due to probable scarcity of food supply, it is feared that in the coming days, the situation may further go down and naturally it will completely affect the foreign exchange reserves of the country in the long run.

PRODUCTION OF SUGAR

YEAR PRODUCTION(000 TONNES)

CHANGE IN PRODUCTION

2001-02 3247 9.84

2002-03 3686 13.48

2003-04 4021 9.09%

2004-05 3116 (22.51%)

2005-06 2960 (5.01)%

2006-07 3527 19.16%

2007-08 4733 34.20%

2008-09 3190 (32.61%)

2009-10 3078 (3.47%)

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SUGARCANE PRODUCTION AS ANTICIPATED

YEAR

AREA CROPPED BY SUGAR CANE

(000 HECTARES)

SUGARCANEPRODUCTION

SUGAR PRODUCTION

SUGAR CONSUMPTION

SURPLUS/SHORTFALL

2007-2008 1241 63 4.7 4.2 +0.5

2008-2009 1029 50 3.2 4.2 -1.0

2009-2010 943 49.3 3.1 4.2 -1.1

4. INTERNATIONAL PERSPECTIVE

Once considered a rare and exotic sweetener, sugar was not always as widely available or important as it is today. As part of the human diet for nearly all of recorded history, sugar has evolved over time, becoming quite a common commodity. Yet the very simplicity of this common sweetener masks the highly complex and elaborate global trade that has developed around it.

Over the past fifty years, especially, the international trade in sugar has changed dramatically. Since it is either imported or exported by every country on earth, sugar has become an integral component of the economic relationships among nations. Because of that unique position, the trade in sugar has both reflected—and been affected by—a wide range of divergent forces, including global politics, health consciousness, the emergence of developing nations as suppliers and consumers, and many others.

SUGAR PRODUCING COUNTRIES

Sugar is mainly produced from two sources – Sugarcane and Beet

The major cane sugar producing countries are countries with warm climates, such as Brazil, India, China and Australia (in descending order). The greatest quantity of sugar is produced in Latin America, the United States and the Caribbean nations, and in the Far East.

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The sugar beet regions are in cooler climates: North West and Eastern Europe, Northern Japan, plus some areas in the United States including California. The beet growing season ends with the start of harvesting around September. Harvesting and processing continues until March in some cases. The duration of harvesting and processing is influenced by the availability of processing plant capacity, and weather - harvested beet can be laid up until processed but frost damaged beet becomes effectively un-process-able.

5. INTERNATIONAL SUGAR MARKET

The international sugar season runs from October to September. There are More than 100 countries which produce sugar around the world either from sugar beet or sugar cane. Approximately 79% of total production is made from sugar cane grown primarily in the tropical and sub-tropical zones of the southern hemisphere, and the balance from sugar beet which is grown mainly in the temperate zones of the northern hemisphere.

Generally, the costs of producing sugar from sugar cane are lower than those in respect of processing sugar beets. Because of the residual nature of the world market, the world market price has historically been one of the most volatile of all commodity prices.

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The five largest exporters in 2009/10, Brazil, Thailand, Australia, EU and SADC (South African developing community), are expected to supply approximately 93% of all world free market exports. South Africa is currently ranked as the 8th largest exporter to the world market.

THE SUGARCANE PRODUCTION AND THE CONSUMPTION

Currently, 71% of the world’s sugar is consumed in the countries of origin, whilst the balance is traded on world markets.

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WORLD SUGAR PRICES

Sugar prices reached its 30 years highest price in world market of US$30.64 cents per pound of sugar in October 2010, the highest point in history was in October 1980 with price of US$ 40 cents per pound of sugar.

SUGAR PRICES IN INTERNATIONAL MARKET

Currently sugar prices are at 30 year high. Raw sugar prices have been rising in the world’s commodity exchanges following speculation that India, the world’s second-largest producer of sugar, is considering restricting exports. The international financial press is reporting that the price of raw sugar in the commodity markets surged to a high as dry weather constrained output in Brazil, the world’s biggest producer, and on news that India may cap exports to boost domestic supplies.

WORLD SUGAR DEMAND AND SUPPLY SUMMARY

The world sugar balance forecast for the period from October 2009 to September 2010 shows a widening gap between world consumption and global output. The world sugar economy is facing the second consecutive year of a significant gap between world consumption and production. World production is now put at 157.160 million tonnes, raw value, up by 4.678 million tonnes or 3.07% from the last season.

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Generally sugar crops in the world’s leading producing countries – with the exception of the EU, Russia, and, probably, India – are now likely to be lower than expectations at the beginning of the season. World consumption is expected to grow at a rate significantly lower than the long-term 10 year average (1.48% and 2.66%, respectively). The lower growth is attributed to soaring world market prices as well as some lingering impacts of the 2008/09 global recession on sugar consumption growth rates. the global use of sugar in 2009/10 is expected to reach 166.585 million tonnes. And the growth in global production is far too small to cover anticipated increases in sugar consumption, and the world statistical deficit is expected to reach 9.425 million tonnes as against 7.247 million tonnes projected in November.

A summary of the world sugar balance in 2009/10 is provided in the table below.

World Sugar Balance

2009/10 2008/09 Change

(mln tonne, raw value) in mln t in %

Production 157.160 152.482 4.678 3.07

Consumption 166.585 164.153 2.432 1.48

Surplus / Deficit -9.425 -11.671

Since 71% of world sugar is consumed in the countries of origin, the export by each country largely depends on its per capita consumption of sugar, the smaller the per capita consumption larger the exports by that country and hence availability of sugar in world market.

PAKISTAN

Pakistan is ranked 11th in the world in sugar production, averaging 3,105 of sugar produced per year. Pakistan consumes an average of 4200 thousand tons of sugar annually, making them the eighth largest consumer in the world. Of this amount, Pakistan imports an average of 213 TMT of sugar, while exporting 242 TMT.

BRAZILSugar output in Brazil, the world’s biggest producer, will rise 17% this year as drier weather will favour harvesting and after cane growers increased planting. The rainy period in the Center South, where about 90% of Brazil’s sugar is made, came before the harvesting season this year, helping the plants develop. Last year excess rains during the

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April-November season led mills to halt output several times because humidity reduces sugar cane’s sucrose. Brazilian mills will produce 38.7 million tons of the sweeteners in 2010, up from 33.1 million tons last year, the ministry’s crop-forecasting agency Conab, said. Mills will process a record 664.3 million tons of sugar-cane into sweetener and ethanol, up from 604.5 million tons last year. Mills will process 54.6% of their cane into ethanol and 45.4% into sugar

INDIA

India is ranked second in world raw sugar production, averaging an annual production of 16,156 thousand metric tons. India is also the second largest consumer of sugar in the world, averaging a consumption of 15,588 TMT. India is ranked fourteenth in exports, averaging 210 TMT, and they are ranked fifth in the world for imports, averaging 667 TMT.

CHINA

China is ranked fourth in world sugar production, with an average of 7,440 TMT produced. Consumption in China works out to an average of 8,353 TMT consumed annually, and places them as the sixth largest consumer in the world. China is the fourth largest importer, averaging 1,409 TMT imported, and they are the tenth largest exporter with 554 TMT exported.MT exported.

UNITED STATES

The United States is ranked fifth overall for world sugar production and fourth overall in average sugar consumption. In an average year, the U.S. produces 7,205 TMT of sugar while consuming 8,786 TMT of sugar. The United States makes up for its large consumption by importing an average of 1,918 TMT of sugar, making it the world's third largest importer. The U.S. will export 270 TMT of sugar in an annual year.

6. PAKISTAN INTERNATIONAL SUGAR MARKET

PRODUCTION

Pakistan has the 5th largest sugarcane growing area in the world, the 4the largest sugarcane producing country, the 15th biggest global producer of sugar but also the 8th

largest consuming country in world, so despite of all these impressive facts Pakistan has to import sugar in huge quantity each year to meet the local demand of sugar.

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Sugarcane is grown on around a million hectares and provides the raw material for Pakistan’s 84 sugar mills, these 84 mills have the capacity to produce 7.0 million tons of sugar but since the per hectare production of sugar in Pakistan is 60th probably the lowest in world because of using ancient technology, Pakistan produces only 3 – 3.5 million tons sugar i.e. the mills in Pakistan are currently working on an average capacity of 60% - 70% hardly so we can say that we have the ability, we have the infrastructure to not only meet our requirement but also export huge quantity of sugar, but only due to lack of interest of government Pakistan even fails to meet its own demand each year.

The sugar industry is the country’s second largest agro-industry after textiles. Besides its edible use, Pakistan also uses sugar to produce alcohol for medicinal purposes, ethanol for fuel, chip board manufacturing, etc.

SUGAR RECOVERY

The average sugar recovery of Pakistan ranges between 8 to 9% as compared to developed and neighboring countries where average recovery rate is over 10%. The recovery data of last fifteen years shows that there is minute improvement in recovery rate. In 1990-91 it was round 8.44% and in the year 2004-05 it was about 9.1%, whereas in between these years the rate was continuously fluctuating. Sindh has average recovery of 9.42% as compared to Punjab and NWFP at 8.26 and 8.34%, respectively. The controllable factors for high recovery includes area under cultivation, production methods, and farm inputs sowing high yielding varieties.

SUGAR CONSUMPTION

Sugar consumption in Pakistan 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 to a figure of 170 millions. 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 2006-07, the overall sugar consumption is forecast at 4 million tons.

Pakistanis is the biggest consumers of sugar in South Asia with 25.83 kg per capita consumption per year, whereas in India it is 14 kg, Bangladesh 10 kg and China 11 kg. Performance of Sugar Industry: Performance of sugar industry in terms of profitability was remarkable during 2004-05.

PER CAPITA SUGAR CONSUMPTION IN PAKISTAN IS HIGHEST IN ASIA

In 1970's in Pakistan per capita yearly sugar consumption was 4.8 but currently, Pakistanis are consuming whooping 28 kilograms of sugar per person in a year, the

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highest in the region. However, the whole country is engulfed in a sugar crisis.

The sugar mills in the country produced more than 3.6 million tons of sugar during 2008-09 crushing season, a reasonable quantity to meet sugar requirements of any other country in the region. Meanwhile the Economic Co-ordination Committee of the cabinet has directed the Trading Corporation of Pakistan to import sufficient quantity of refined sugar to meet the demand of the commodity and maintain its price.

The sugar consumption in India is about 18 kg, Bangladesh 10 kg and China 12 kg and their yearly increase in sugar consumption is very moderate and affordable.

Economists say that sugar consumption in Pakistan has been showing an increasing trend for the past 20 years. It increased from 2.9 million tons in 1995-96 to 4 million tons in 2008-09. One of the many reasons behind this increase is rise in the total population of the country, which has reached to a figure of 170 million. The per capita sugar consumption data shows that it has also risen from 22.2 kg in 1995 to 27kg in 2008-09.

YIELD PER HECTARE IS AMONGST THE LOWEST IN WORLD

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, Philippines 92.6, Thailand 92.6, Australia 75.5, Egypt 105 tons and Pakistan only 46.0 per hectare.

REASONS FOR LOW YIELD

There are several reasons for the low yield of sugar cane crop in Pakistan. Firstly small farms are a major source of sugar cane in both Punjab and NWFP. These farms tend to apply few inputs such as fertilizer and pesticides and sometimes they do not apply them at appropriate time. Another problem is water shortage. Sugar cane is a high water delta crop and shortage of irrigation water results in low yield.

There are critical periods in which cane should be planted sometimes within a period of 15 to 20 days. Planting may be delayed by crop rotation considerations, canal closure, or lack of suitable implements to prepare the soil properly. In Sindh, fall planting can be used to increase both yield and sucrose content. However, relatively few farmers follow this production practice at present.

There are frequently, long periods between harvest and the time cane is crushed. In 24 hours cane can lose up to 2.5 per cent of its weight and the extraction percentage of sugar is also reduced. The experts say delays in crushing are caused by long waiting periods to unload at mills, long harvest time (the time taken by farmers to cut a full load of cane), long distance hauling, and dumping at collection centers requiring additional time to re-load and haul cane to the mills.

Outbreak of disease and pest attacks have reduced yield in many years. They have also increased the cost of production to combat these problems. In some areas of NWFP cane

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production has been abandoned because of termite problems. Later, harvesting of cane in the months of April, May and June is also reported to increase pest infestation problems.

CURRENT RISE PRICES OF SUGAR IN PAKISTAN

The current increase in prices of sugar is due to decline of sugar production in country as well as tight global supply. Sugar production across the globe has declined this year which has resulted in the escalation in world sugar price from 262 per ton in Oct 2008 to 293 per ton in Feb 2009 and further upto 300 per ton in April 2009 which was also reflected in local markets. Pakistan has to import sugar when ever there is a short fall in production

YEAR RUPEES IN MILLIONS % change

2004-05 5,229 2666.7%

2005-06 37,366 614.60%

2006-07 15,722 -57.59%

2007-08 912 -94.20%

2008-09 4,505 393.96%

2009-10 1,551 -65.57%

2010-11 11,707 654.80%

2003 2004 2005 2006 2007 2008 2009 2010Rs0.00

Rs5,000.00

Rs10,000.00

Rs15,000.00

Rs20,000.00

Rs25,000.00

Rs30,000.00

Rs35,000.00

Rs40,000.00

Sugar Imports in Pakistan

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SHARE OF SUGAR IN IMPORTS

In 2008 share of sugar in total import was 0.1% and in 2009 the Share of sugar was 0.7 %. The share of sugar in all food imports each year is about 10% i.e. Pakistan can save 10% of its foreign exchange which it spends to import food items each year if it only becomes self sufficient in sugar production.

FOREIGN INVESTMENT IN SUGAR SECTOR IN PAKISTAN

Pakistan is amongst the most low cost sugar producing countries of the world and because of this factor international investors are very much interested in Pakistan sugar and sugar related products industry. Sugar is placed in the economic group of “sugar, paper and pulp” by the sate bank of Pakistan and the investments are recorded accordingly.

Foreign direct investment in sugar industry

YEAR INVESTMENT IN MILLION US$

2004 4.3

2005 5.1

2006 17.4

2007 10.5

2008 10.1

2009 14.3

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2004 2005 2006 2007 2008 20090

2

4

6

8

10

12

14

16

18

20

foreign investment in US$ million

Series 1(Source: economic survey Pakistan 2009-10)

This trend shows fluctuating investment clearly indicating the effects of inconsistent policies.

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COUNTRY WISE SUGAR PRICES

The country wise comparison of sugar prices shows that the sugar price in Pakistan is the highest in the region:-

COUNTRY UNIT VALUE IN PAKISTANI RUPEES

ISLAMABAD

(4/5/2009)

Kg 47.13

DHAKA

(5/5/2009)

Kg 41.08

NEW DELHI

(30/4/2009)

Kg 44.01

COLOMBO (4/4/2009)

Kg 50.19

TEHRAN

(28/01/2009)

Kg 56.21

KABUL

(29/4/2009)

Kg 48.00

Source: ministry of commerce

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7. SUGAR CRISIS

Sugar is one of the food items that in the world market is the cheapest and yet consists of the highest amount of energy for a given quantity. It is consumed by the Pakistani population in large quantities in different forms, and more heavily as compared to other economies. Pakistan has a lot of fertile land, and enough capabilities to produce not only enough quantity for domestic consumption, but also to export it. Yet we observe that since 2000 the economy sees that this sector is troubled. Ever since then it seems to be hit by a state of crisis, whereby prices seem to be on a constant rise while the quantity of supply keeps on fluctuating, often causing shortages. Reason for this are attributed to several factors, but they more or less fall in the following two broad categories:

1. Artificial reasons2. Natural reasons

It’s been under great debate that the sugar crisis is not due to factors like bad crop yield, or other natural reasons. Several authorities claim that it is due to the fact that the governmental policies and acts are self contradictory which causes the frequent shortage in supply and increased prices. It is a known fact that several political figures own the majority sugar mills and therefore they control how it is passed on to the middle men.Like wise, in spite of the apparent stance of the govt. against hoarders, we witness that hoarding has always been a big problem, especially in the case of sugar. The mill owners and large suppliers often hold large quantities and create an artificial shortfall. Then they set high prices for its release. The major chunk of the crisis that we see is considered to be caused by these artificial factors.

However, natural factors also play a role in the sugar crisis faced by our country.

The sugar industry has asked the government to take immediate corrective measures to save the industry which is currently going through difficult times.

People were hopeful that the agreement signed between the mill owners and the growers for the purchase of sugarcane at an agreeable price of Rs50 per mound would settle down the issue. However, it did not happen and unfortunately the crisis has not been resolved yet.

Though the dispute between growers and the mill owners of Sindh was resolved to some extent after both the parties agreed on the sugarcane price (Rs50 per mound), yet the issue remains unsolved in the Punjab as the growers in that province are not ready to budge from their demand of Rs60 per mound. The sugar industry which was already facing problems due to the increase in sugarcane prices was burdened further when the government announced to increase the sales tax from 3.50 per cent to 4 per cent. As a consequence of the increase in sugarcane price as well as the sales tax, the overall production cost has been increased a lot, while on the other hand, the import of sugar

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from India at relatively low price is posing a serious threat to the survival of the local sugar industry.

According to the sugar industry people, besides importing 500,000 tons of raw sugar, the government has allowed import of 200,000 tons of refined sugar from India without ascertaining the exact volume of the local production during the current season. As per an estimate, the total stock of sugar would be around 32-33 laky tons against the consumption of 31 laky tons of sugar leaving 1.5 million tons in surplus. Had the government waited till the assessment of the exact volume of production, the outflow of foreign exchange on account of import of sugar from India could have been prevented.

The ultimate sufferers of this mismanagement in the sugar industry would be the consumers who would have to buy this essential item at a much higher rate. It may be recalled that before the start of the crisis, sugar was being sold at a price of Rs18 per kg (in 2001) which shot up to the level of Rs30 per kg before the month of Ramadan, in the same year. At that time prices in India were Rs12-13 per kg. In the best interest of the people, the economic managers in Pakistan, especially those looking after the agriculture sector would have to evolve a policy to keep the prices in line with the buying power of the people at the grass root level.

It is their duty to keep an eye over the elements responsible for politicizing the agriculture sector as well as on the profiteers who are the masters of creating such crisis time and again to achieve their nefarious goals.

To avoid recurrence of such crisis, the government of Sindh had assured to take appropriate measures against the middlemen in the sugarcane industry, ensuring a direct supply of sugarcane to the sugar mills from the growers.

Also, the local industry demanded that in order to enable it to meet the threat it faces from the imported sugar, the government should increase the import duty from 15 per cent to 40 per cent so that the local industry could be saved from the devastating effects due to dumping prices offered by the Indian exporters. In fact, it requested the government to place sugar on the negative list in order to restrict its import from India. The landed cost of the imported sugar from India is around Rs22-23 per kg which is much cheaper when compared to the price of local sugar which is Rs24 per kg. While the sugar industry has serious concerns about its survival in such a situation, the consumers, on the other hand, have their own grievances. It’s not their concern to think about the reasons due to which the Indian sugar industry manages to sell sugar at Rs13-14 per kg to its consumers. Naturally, they would like to buy sugar at a relatively low price, no matter from where it is imported and regardless of it being a threat to the very survival of our own sugar industry.

It is a matter of great concern that despite having a strong industrial and agriculture base, the sugar industry is forced to operate below 70 per cent of its capacity mainly because of all these problems. While the government is determined to use all the available resources, the potential of sugar industry is being wasted. The situation demands that our economic managers find some solution in order to get benefits from the available resources in sugar industry at the optimum level.

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Following is an extract of an article published in 2009, which would help showing a cleared picture of the crisis:

Pakistan is the tenth largest sugar producer in the world, and yet it has to import sugar, exposing it to the effects of sugar shortages and rising prices in the world. Pakistanis consume over 25 Kg of sugar per person versus India's 20Kg. Sugar cost Rs.25 per Kg (30 US cents) at the start of 2009 and now costs more than Rs.50, says independent economic analyst A.B. Shahid. This doubling of the price is likely to further enrich the large number of sugar producing politicians who are already rich and powerful.

The most pessimistic estimates show a 23 percent decline in sugar crop production this year. While last year Pakistan produced 4.7 million tons, farmers are on track to produce 3.2 million tons this year. That means a severe shortfall as annual national consumption is 4.2 million tons.

Sugar production and per capita consumption as well as overall calorie intake have been rising in Pakistan. 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, which is less than the target production. But the government is importing about 300,000 tons of sugar to ensure availability of sufficient stock to cover any shortfalls from the usual smuggling to Afghanistan which remains a fact of life in Pakistan.

In addition to relatively large per capita sugar consumption, Pakistanis also consume significantly higher amounts of meat, poultry and milk products than other South Asian nations, getting more protein and almost half their daily, per capita calorie intake from non-food-grain sources.

The fact that Pakistanis have a sweet tooth is not lost on the nation's ruling elite, particularly the powerful political families and the Pakistani military. While 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 is owned by PPP leader and incumbent ZTBL President Ch Zaka Ashraf.

The media reports also indicate Kamalia Sugar Mills and Layyah Sugar Mills are 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

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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. PML-F leader Makhdoom Ahmad Mehmood owns Jamaldin Wali Sugar Mills. Chaudhry Muneer owns two mills in Rahimyar Khan district and Ch Pervaiz Elahi and former Minister of State for Foreign Affairs, Khusro Bakhtiar have shares in these mills.

Among other basic food commodities, per million population wheat consumption in Pakistan is 115,000 metric tons versus 63,000 metric tons in India, according to published data.

According to the FAO, the average dairy consumption of the developing countries is still very low (45 kg of all dairy products in liquid milk equivalent), compared with the average of 220 kg in the industrial countries. Few developing countries have per capita consumption exceeding 150 kg (Argentina, Uruguay and some pastoral countries in the Sudano-Sahelian zone of Africa). Among the most populous countries, only Pakistan, at 153 kg per capita, has such a level. In South Asia, where milk and dairy products are preferred foods, India has only 64 kg and Bangladesh 14 kg. East Asia has only 10 kg.

While it remains very low by world standards, meat and poultry consumption has also increased significantly in Pakistan over the last decade. Per capita availability of eggs went from 23 in 1991 to 43 in 2005, according to research by N. Daghir. Per capita meat consumption in Pakistan now stands at 12.4 Kg versus India's 4.6 Kg.

In spite of South Asia's growing horticulture industry, the intake of fruits and vegetables in India and Pakistan is surprisingly low at less than 100 grams per day per capita, according to the World Health Organization. This figure is far lower than the 300 grams of fruits and vegetables per person in Australia, EU and the US.

In spite of the fact that there is about 22% malnutrition in Pakistan, the average per capita calorie intake of about 2500 calories is within normal range. But the nutritional balance necessary for good health appears to be lacking in Pakistanis' diet ary habits. One way to alleviate the sugar crisis in Pakistan is to reduce sugar consumption and substitute it with greater intake of fruits and vegetables. There is an urgent need for better health and nutritional education through strong public-private partnership to promote healthier eating in Pakistan.

Article by Faisal Kapadia published in 2009, said:

This year the shortfall in supply is particularly acute in the sugar market. To combat this government plans to increase the volume of sales of sugar through utility stores (subsidized government outlets) from 40,000 tons to 100,000 tons. However just driving past any of these stores is proof enough to convince a person that sufficient supply of sugar is not available.

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As per a report in The Dawn News

This report cites the supply condition in Karachi, the stores are getting less supplies of sugar than usual and are unable to cater the growing demands of the consumers. The sugar price in the open market rose to Rs.55-58 per kg (when available) whereas the official selling price of sugar is Rs.38 per kg.

Pakistan has approximately 80 sugar mills. Most of them owned by investors and politicians. Level of hypocrisy is that before Ramadan, they have started stocking sugar and its price from Rs.38 per kg jumped to Rs.54. It always looks bad when you switch to Pakistani news channels but worst when such crises is on its peak and a minister is briefing press that due to increase in international prices of sugar, sugar prices are increasing in the Pakistan.

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 (they) opt(ed) for growing wheat instead to avail attractive incentives. Now comes time for manipulations by the mill owners. Not only are the mill owners accused of delaying payments causing a decrease in supply of about 15 to 20 percent as compared to last year, they have also hoarded large amounts of supplies. These supplies have been hoarded (conveniently) in order to create an artificial shortage in the market.

The current year saw a natural decrease in sugar production. In general, farmers, like others, only produce crops that give them maximum profit. In 2008-09, the current government increased the wheat (purchasing) price to Rs.950 (minimum price) to encourage farmers to grow wheat. This was an attractive incentive and resulted in attracting non growers to grow wheat (as it is profitable). As a result, sugarcane farmers switched to wheat production which resulted in a drop in sugarcane production.

Moreover, over the past decade, sugar cane production has declined because of the naturally difficult/negative constitution of the sugar market. Numerous specialists state that farmers have decreased the total area under production due to water shortage, behavior of the mill’s management, late payments, increased input cost, and diseases and rodent attack. They especially blame mill owners for late and/or no payments to farmers and limited irrigation water that make the farmers reluctant to grow the crop. Hence, these two factors have naturally reduced the supply of sugar by 15 to 20 percent compared to last year.

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Right now, the Pakistan government is thinking of importing sugar from abroad to meet this shortfall. However, foreign traders of sugar such as Brazil and India have also raised their prices. So the price will not be coming down anytime soon. What happens in the next few days is critical as people are ready to come out on the streets to protest the sugar crisis.

A cleared picture of the crisis and its causes will be evident by the article published in 2007 in Pakistan Economic Review:

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.

Among the 105 countries of the world growing sugarcane, Pakistan ranks 4th in area, 14th in production and 60th in yield. Although, Pakistan happens to be the world's fourth 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%. Pakistan has all the resources to produce high yield of sugarcane, yet it could neither produce sugar for export in the international market on a competitive rate nor could it get rid of import to meet the local demand.

Pakistan Sugar Industry – after flood scenario

SUGARCANE CROP DAMAGED The sugar crop was expected to produce about 3.8 million tons of white sugar before the floods struck. After The food ministry estimated the output at about 3 million tons against an annual demand of 4.2 million tons. The government of Pakistan is considering a tax holiday for companies that process sugar beets

The government this week waived a 25 percent regulatory duty and allowed millers and traders to import as much raw sugar as they want. The state-run Trading Corporation of Pakistan (TCP) will have no role in raw sugar imports.

Millers estimated output at 3.6 million tones and said the country does not need more than 500,000 tones of raw sugar to meet the shortfall.

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8. FACE-TO-FACE INTERVIEW

Place – Imtiaz Store, BahudarabadName of interviewee – Mr.Imtiaz

Q.1 Where do you buy your sugar from?

A.1 From nearby warehouses we only grow rice in our own personal farmlands.

Q.2 What is the current price of sugar?

A.2 Rs.70 per kg.

Q.3 What is your margin? A.3 50%.

Q.4 Why was sugar sold for more than Rs.100 last week?

A.4 We do not decide the price on such food items the price is set by the Government and we cannot do anything about it.

Q.5 Due you think such price hikes are deliberate or shortage in the supply of sugar?

A.5 Yes, our politicians themselves are mill owners and run the industry and they do this to huge profits.

Q.6 How do they increase the sugar prices?

A.6 They definitely do hoarding of sugar in their warehouses to make to create artificial shortage and then eventually the price increases.

Q.7 Your solutions to this particular problem?

A.7 Government regulations, strict action against these mill owners who form cartels and manipulate the sugar industry.

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9. SWOT ANALYSIS

STRENGTHS

1. Generates revenue for the industry2. Employment3. Provides essential products to other industries

WEAKNESSES

1. Poor management and planning2. Unable to meet domestic needs3. Lack of technology and modernization4. Lack of education5. Poor-quality sugar

OPPORTUNITIES

1. Exporting to other countries2. Large area of cultivable land available

THREATS

1. Increase in fuel prices2. Recent floods3. Smuggling4. Artificial shortages, cartelling and hoarding5. Pest attacks

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10. RECOMMENDATIONS

1. Increase Sugarcane yield per area

Our sugar yield i.e. cane yield x sugar recovery %cane is less than half of the developed cane growing countries of the world. Still it is not the lowest in the world. The goal of increasing sugar yield per unit area is difficult, time consuming and needs dedicated efforts of government, millers and the growers.

Some of the measures to bring down the cost of cultivation and improve cane productivity include the selection of the right varieties, maintenance of soil health, quality planting material, nutrient management, adoption of copping systems approach, weed management, water management, ratoon management and sound post harvest handling, according to the scientists.

2. Educating the Grower

As Grower is the main key factor which can help to increase the sugarcane production from the field. In Pakistan most of the grower doesn’t know the proper method or procedure of sugarcane cultivation. So that’s why the cane produced is of no good quality and we have less cane and sugar recovery. So it is recommended that there should be organizations who should guide the growers to increase their production. Here are some of the steps that if taken properly can improve the sugar cane production.

3. Improvement in Technology

There is a lack of research in Sugarcane technology and the industry is more labor-intensive than capital-intensive. Sugarcane is a deep-rooted crop and proper land preparation plays an important role in the development of cane root system, and achieving optimal growth of the crop. Land should be prepared by deep ploughing at least after every two years. The soil should be disked.

It is very important that well-rotten farmyard manure (FYM) should be applied a month prior to land preparation. Press mud from the sugar industry is another excellent source of organic matter and nutrients.

Soil in the prepared field should be friable and well worked so that full germination takes place and later on plants grow without any inhibiting barriers (compact sub-soil layer).

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4. Soil Insect Control at Planting Time

Growers should be ever mindful of practices they can use to decrease the possibility of soil insect damage. Only two crop conditions require use of a soil insecticide in Louisiana sugarcane fields and usually only in sandy soils. These are:

(a) When pasture, turf or grass-infested land is brought into cane production for the first time or after being out of cane production for several years. There are usually enough grubs or wireworms already established in this type of land to warrant a preventive application of insecticide at cane planting time. However, a soil insecticide application may not be needed with the second plant-cane crop if the field has been kept reasonably free of grass during the ratoon crops.

(b) When cane fields are extremely grassy, particularly when cane is planted in a field that was not kept free of heavy grass infestation when fallow. Ongoing wireworm and white grub infestations will persist in grassy fields. Again, this may be needed only on light or mixed soils.

Growers with fields similar to those described should consider control measures for soil insects at planting time and base chemical control on verification of soil insect pest infestations (with fermented corn baits). Based on new research data, the economic threshold is slightly above one wireworm per bait sample before planting. Soil insecticides have had a suppressive effect on beneficial predators in sugarcane studies.

5. Planting Time

The selection of an appropriate planting method and schedule greatly influences crop growth, maturity, and yield. Since low temperature and moisture stress are detrimental to germination and subsequent establishment, the planting season in subtropical regions is preferably spring. But in areas where winter is severe enough to restrict growth or even kill sugarcane, planting material may only be available in autumn, thus necessitating pre-winter planting. In tropical regions, particularly where irrigation is not practiced, a sufficiently moist season should be selected for planting and establishment.

There are two planting seasons: fall and spring. Fall planting starts from the first week of September and continues to mid-October in the Punjab and Sindh, while in the NWFP planting is done in October and November. Spring planting starts from mid-February and lasts until the end of March in the Punjab and Sindh. These planting times are strictly observed because late planting can reduce the yield by as much as 30 percent.

September planted crop usually produces 25 to 35 % higher yield. In Pakistan Planting time of Sugarcane planting is usually carried out in autumn and spring seasons. Autumn

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planting is of high yield and high sugar recovery compared to spring planting. In fact, September planting gives very luxuriant growth, which is mostly vulnerable to lodging. The crop gives good appearance till June-July but is subject to lodging in July or even earlier if there are windstorms or excessive rains.

6. Seed Rate and Planting Pattern

Appropriate seed rate and spacing are often ignored by farmers, with the result that the optimum plant population, which is the key factor in sugarcane production, is not achieved in the field. The seed rate and spacing between rows differ with variety. Thick-cane cultivars like 'BL-4', 'Triton', and 'PR-1000' require a higher seed rate and more space between the rows than thin and medium-cane varieties. Eight to nine tonnes of stripped cane per hectare for thick varieties, and six to seven tones for medium to thin varieties is sufficient to produce a desired plant population of about 0.15 million canes/ha. A spacing of 1 m between the rows of thick varieties, and 0.60-0.75 m for thin to medium varieties allows sufficient space for operations like intercultural and earthing up.

7. Method of Planting

Sugarcane should be planted at a row spacing of 90 cm to 1 m. Two budded double sets should be placed end to end in the furrows covered with 2 to 3 cm soil layer. About 3.2 to 4 tonnes seed (80 to 100 maunds) of thin cane varieties and 4 to 5 tonnes seed (100 to 120 maunds) of thick varieties is sufficient to plant one acre.

Research has shown good yield increases in tonnage and sugar per acre when the planted row was widened from the V-furrow to the 15- to 18-inch furrow. It showed further yield increases as the furrow width was increased from 15 to 18 to 24 inches. Based on this research and the problems encountered by growers in handling furrow widths of more than 18 inches, it is suggested that growers use a 15- to 18-inch furrow for planting in 2001. Growers who can successfully handle the 24-inch width furrow are encouraged to do so. It is also suggested that the furrow opener be constructed to leave a wide bottom with a slight indentation on each side of the furrow and a slight ridge of loose soil in the middle of the furrow bottom. This opening configuration can be obtained by attaching a single disk on each side of the row opener to dig out the furrow sides and deposit the soil in the furrow middle. Some growers have found that packing rows ahead of opening will give more uniform furrows when opening with a three-row opener.

8. Depth of Planting with Relation to Water Furrow

To avoid water damage to seed cane, it should be placed at least 3 to 4 inches above the final water furrow or middle. In soils with poor internal drainage, the seed cane should be placed even higher above the final water furrow.

Growers should be aware of the need to keep the seed cane above the area where water levels will hurt cane stands. Low row height at planting time could be a problem, especially with billet seed cane.

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9. Hot water seed treatment

Seed may be treated with hot water at 520 C for 30 minutes and with fungicide. This will help in better germination and the control of many cane diseases.

10. Lenient Credit Policies

The sugar industry needs to grow and it will require a lot of finance from the banks. Pakistani banks have the highest bank spread in the world

Recommended varieties of sugarcane

Punjab

Early maturing: BL – 4 , L –116, BF – 162, CP 43-33,CP 72-2086, CP 77-400, SPSG-26, CPF-237

Mid season: TRITON, COL –54, SPF-213

Late maturing: L –118, COJ-84

Sindh

Lower Sindh (areas south to Hyderabad)

Early maturing: BL –4

Mid season: PR –1000, BF –129

Late maturing: NIA-98

Upper Sindh (areas north to Hyderabad)

Early maturing: BL-4, L –113, L –116, TRITON, SPSG-26

Late maturing: NIA-98

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N.W.F.P.

Early maturing: CP 48-103, CP 51-21, CP 65-357, CPM –13, CO –1321, Mardan-93, JN 88-1, ABID-96, SPSG-26

Mid season: CP 77-400, CP 44-101, IM –61, L 62-96, Mardan-92, Bannu-1

Around 95 per cent planted BL-4 variety in the study area. This variety flourishes very well in heavy fertile and well-drained soil with good irrigation. As the variety occupied good fields, it established high yields. New variety BF-12-is yet in the stage of multiplication, while SPSG -26 and Th-10, has just been introduced. Results show that 87 per cent planted recommended varieties and the remaining 13 per cent planted non-recommended varieties The economic life span of sugarcane variety varies from 8 to 10 years and after that replacement the variety is necessary.

11. BIBLOGRAPHY

www.finance.gov.pkwww.sbp.comwww.pakkissan.com.pkwww.merapakistan.com

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