Proposal Api

PROPOSAL REPORT ONN SUGAREDUCATION INDUSTRY SUBMITTED TO: SIR. AFAQ ALI KHAN

BY:

Muhammad Moeiz Siddiquie & Syed Owais Ali

TABLE OF CONTENTS • • • • • • • • • • • • • • • • • • •

Introduction History Overview Importance Statistics (sources) Standard of Education Policies of Government(sources) Implementations(sources) Achievements of Pakistani Students(Sources) UNO UNICEF Advices of Leaders Core Strategic Targets (s) Socio- Economic Impact Forward & Backward Linkages SWOT Analysis Problems Recommendations Events In Pakistan on Education Industry In 2008.(s)

Sugar Industry

CONTENTS

•Importance

•History •Data Collection •Conclusion •Glossary

INTRODUCTIONMPORTANCE

Sugar is a class of edible crystalline substances including sucrose, lactose, and fructose. Human taste buds interpret its flavor as sweet. Sugar as a basic food carbohydrate primarily comes from sugar cane and from sugar beet, but also appears in fruit, honey, sorghum, sugar maple (in maple syrup), and in many other sources. It forms the main ingredient in much candy. Excessive consumption of sugar has been associated with increased incidences of type 2 diabetes, obesity and tooth decay.

POTENTIAL: The sugar industry plays an important role in the economy of the country. It is the second largest industry after textiles. The Sugar industry employs over 75000 people, including management experts, technologists, engineers, and 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. WHY: We choose this industry because it is the fifth largest industry of Pakistan. Sugar is considered as the basic need and it has a real importance in a human life. Sugar industry in Pakistan has a great worth and it is one of the major sector in the Pakistan. FOR WHOM: By reading this report any one can easily get the idea of the reputation and overall scenario of Sugar industry in Pakistan.The result of lack of policy framework has been responsible for financial turmoil and economic distress for sugar industry during the past six years in succession. The millers faced problems whether there was a shortfall in sugarcane supply or surplus production of sugar. The dilemma of sugar industry is a very high component of raw material (sugarcane) cost. In addition to this, other costs, i.e. taxes, operating expenses, depreciation and financial cost do not allow any scope for economies of scale. Low level of capacity utilization (around 45%) and cost/price disequilibrium in domestic and export markets are other impediments. However, persistent increase in sugarcane support price can be termed the root cause for the current malady.

REFERENCES

http://www.pakistaneconomist.com http://www.Iarreports.com

HISTORY

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. At present there are 76 sugar mills operating in Pakistan.

INDUSTRY SCENARIOATA COLLECTION The Data for this report will be collected from Thethe internet, books, magazines, different comments of economist on sugar industry and also from the sugar mills sites available on internet. Sugar industry is mostly located in the rural areas of Punjab and Sindh. A small percentage of total production is produced in the NWFP province. Previously, Punjab was partly dependent on supply of sugar from Sindh, but lately the establishment of some large-scale units in Punjab has made the province self-sufficient in the commodity. Sindh still has surplus production. At present the installed capacity for sugar production is estimated above 5.5 million tonnes, whereas the demand is estimated around 3 million tonnes. The large-scale capacity was added in the nineties and was the outcome of entry of politicians in sugar industry — both in Punjab and Sindh. Since this expansion was mainly financed by state-owned financial institutions, often the basic criteria for extending credit — economic viability — wascriteria for extending

credit — economic viability — were ignored. Whatever has happened is history now which one cannot change but at least efforts should have been made to increase sugarcane supply. It is feared that politicians, who enjoy power as sugarcane growers, are resisting efforts to increase sugarcane output in the country. They fear if the output is increased there would be a reduction in sugarcane price. The result is, over the last many years millers were forced to pay a much higher price for sugarcane as compared to the official support price. A key factor, which has the potential to increase sugar production is clear cut sugar export policy, has been missing. Whenever, there was sugar production above domestic consumption, millers found it difficult to export the surplus. Export of sugar is not solely aimed at earning foreign exchange but more importantly to optimize cost through higher capacity utilization. It is worth noting that during 1999-2000 crushing season eight mills did not operate and another three could not be commissioned. Had all of them were fully operational the level of chaos would have been beyond any one's expectation.expectation? Most of such mills are located in Sindh. Three mills owned by Sindh Sugar Corporation: Dadu, Larkana and Thatta have been non-operational for years. The units in private sector which are not operating are: Bachani, Tharparkar, Thar and Kiran. In the Punjab Pasrur and Qand Ghar did not operate during 1999-2000 season and Mian Mohammad Sugar Mills of AJK has not commenced operations as yet. Saleem (Charsadda) in the NWFP also did not operate during last season. Non-operating mills and those which could not commence sugarcane crushing are a burden on economy in general and financial sector in particular. According to some industry analysts, the delay is more due to political reasons rather than economic factors. The mills owned by Sindh Sugar Corporation are not operating because federal and provincial governments have not been able to follow their privatization. For this delay no one except federal/provincial governments are responsible. These analysts say that the apathy of government is unpardonable. Most of these mills are located in Sindh where the conditions are better suited for cultivation of sugarcane. Besides, yield and average recovery are higher, as compared to Punjab. Therefore, the efforts should be to make

all the units functional at the earliest. Shortage of sugarcane should not be used as escape goat.

ZONING According to some industry experts the main reason for the shortfall in sugarcane production is abolishing of zones. The concept of zones had worked satisfactorily in the past — barring a few political and government interventions. The system was most suited for the millers as well as all other stakeholders, i.e. sugarcane growers, financial institutions, tractors and other inputs manufacturers. By following the system of zones, mills were able to ensure availability of sugarcane in required quantity. Financial institutions also benefited from this practice as their credits to farmers were secure against payment for sugarcane

supply. However, at some stage it was realized that the system was being exploited by the millers. According to industry analysts the discontinuation of zoning has caused more damage rather than solving the problems of growers. They also say, "If some millers were exploiting the situation they should have been made to behave properly rather than abandoning the system. It is still not too late. If the government is serious in ensuring adequate supply of sugarcane in the country, it must implement the zoning system without delay."

Bye-Products These comprise molasses, bagasse and processed molasses which is the juice of what is left over of crystalised sugar.It has a good market outside the country. Domestically it is used as livestock feed, industrial alcohol and tobacco blending. Bagasse is the residue of cane after it is crushed for juice. It is utilised as paper and chip board raw material.

SUGAR IMPORT Every one agrees that sugarcane is an agricultural commodity and there are various factors, affecting output, beyond human control. Therefore, import of sugar is a makeshift arrangement to overcome a temporary short supply. However, history shows that sugar import has caused damage to industry rather than containing price of commodity in the open market. It has been mainly due to two reasons: ill-timed imports and quantity imported being much higher than desired. An ill-timed import, that too in large quantities, affects lifting of sugar from mills. Sugar production is a seasonal activity. The mills, at an average operate for 150 days, and supplies are made throughout the year. As the industry now has large daily crushing capacity there are efforts to even further reduce the number of crushing dates. This practice has helped in improving average recovery but not fully appreciated by growers who are under the impression that their payments are delayed. In fact growers get better price when average recovery is higher. This issue was highly politicized last year and the same was witnessed before crushing was started by the mills. Recently the policy planners have made a totally absurd decision about import of sugar. It is estimated that over 750,000 tonnes has already landed Pakistan when the crushing was in full swing. The rationale for this was said to be, "to contain price hike." However, an industry expert has a very strange explanation for this. He said, "The aim of large scale import was not to contain sugar price in local market, the objective was to raise extra revenue — import duty on sugar — to satisfy the IMF about revenue collection target. The central bank has supported this, may be unknowingly, by buying dollars from kerb market to finance sugar import." What a novel idea to meet shortfall in revenue collection!

TAXES AND LEVIES The policy planners accept and plead that sugar is a basic commodity and its demand must be met even through expensive imports. However, they do not accept another fact that the industry is also over-taxed. The component of tax in sale price of sugar is around 17 per cent. If the government is really serious in keeping sugar price at modest level, it should cut down level of tax. At present the industry pays 11 different taxes — five federal and six provincial which comes to about Rs 3,500 per tonne. The two levies, i.e market committee fee and sugarcane/Road cess are highly undesirable. The very purpose of collecting these taxes has been defeated over the years. The amounts collected in the past were spent on 'unknown' heads of expenditure.

SUGAR PRICING Sugar industry deserves a fair market price keeping in view its production cost plus economic return on equity. Since sugar production cost is entirely dependent — to the extent of about 85 per cent by the government policy framework — only the government should resolve the outstanding issues. The government has discontinued the practice of fixing support price of cotton, why can't the same be followed in case of sugarcane? Let the market forces determine the price of sugarcane as well as sugar. The government can still play the role of intervener by not allowing the prices move beyond a specified bandwidth.

Price Spread: Of the consumer's rupee spent on sugar purchase about 40 percent goes to the farmer. The next largest share, being 24 percent, is pocketed by the government as excise taxes. The processors (sugar mills) receive 21 percent while the wholesalers and retailers get 9 percent and 6 percent respectively. These shares have been calculated by another report, entitled "Pakistan sugar industry - economic and policy analysis", prepared by Pakistan Economic Analysis Network (EAN), a project of the Ministry of Food and Agriculture, GOP, published in the late sixties. According to a survey recently conducted by the Federal Agricultural Marketing Department the price-spread among various agencies concerned still remains more or less the same. The authenticity of the above price-spread is considered above board when compared with other sugar producing countries of the world. However, in Pakistan farmers share looks somewhat higher. As a matter of fact, as a policy measure, it has been kept high to ensure sugarcane production at a desired level so that it may not fall short of the country's requirement. Sugarcane production to a great extent depends on the support prices fixed by the government. Fixation and enforcement of these prices are considered necessary to make sugarcane cultivation competitive with other competing crops like cotton. The other factors affecting the cane production include cost and availability of various inputs like fertiliser, pesticide and irrigation water. The uncontrollable factors such as weather and change in technology also influence the cane production.

OUTLOOK Debt servicing has become a serious issue in sugar industry. There is a suggestion that the government should allow one year moratorium, at least, to all the mills. In the past payments of only defaulting units were rescheduled which was not justified. While the defaulters were given concessions, those making timely payment had no incentives. It is also suggested that financial institutions must also write-off those amounts which are not collectable. However, names of such borrowers and amounts should be made public and there should also be an embargo on their future borrowings. Zoning system should be introduced once again without further delay. The country needs to double sugarcane output. This increase can be achieved by improving yield and without increasing land under sugarcane cultivation. It will help all the stakeholders, i.e. growers, millers, lenders and consumers. However, the post of 'Cane Commissioner' should be filled by hiring competent people from the private sector. Last but not the least; the government must announce sugar export policy valid for three years. The industry does not need to export sugar for earning foreign exchange but to optimize cost.

Sugar and Sugarcane Production Sugarcane production during the last 5 years has been as under: Year 1996-97 1996-97 1996-97 1999-2000

Production 41,9981 53,104 55,191 46,333

2000-2001

43,606

SUGARCANE CRUSHING AND SUGAR PRODUCTION Year

Cane Crushing Tonnes

Sugar Production Tonnes

1990-91

22,603,696

1,908,838

1991-92

24,795,816

2,296,698

1992-93

27,276,186

2,375,396

1993-94

34,181,899

2,900,524

1994-95

34,193,290

2,983,082

1995-96

28,151,434

2,449,598

1996-97

27,352,918

2,378,752

1997-98

41,062,473

3,548,960

1998-99

42,994,911

3,530,932

1999-2000

28,982,711

2,414,746

SUGARCANE CRUSHING Sindh Year

Million tonnes

90-91

9.598

91-92

11.956

92-93

12.725

93-94

13.032

94-95

12.038

95-96

10.341

96-97

10.314

97-98

13.853

98-99

15.095

99-2000

10.856

SUGAR PRODUCTION Sindh Year

Million tonnes

90-91

0.902

91-92

1.187

92-93

1.175

93-94

1.172

94-95

1.107

95-96

1.008

96-97

1.028

97-98

1.374

98-99

1.353

99-2000

0.996

SUGARCANE CRUSHING Punjab Year

Million tonnes

90-91

12.095

91-92

11.745

92-93

13.433

93-94

20.066

94-95

20.975

95-96

16.993

96-97

16.293

97-98

25.905

98-99

26.081

99-2000

16.830

SUGAR PRODUCTION Punjab Year

Million tonnes

90-91

0.934

91-92

1.012

92-93

1.104

93-94

1.634

94-95

1.771

95-96

1.376

96-97

1.293

97-98

2.066

98-99

2.033

99-2000

1.316

SUGAR CANE SUPPORT PRICE MILL-GATE DELIVERY (Amount in Rupees) Year

Sindh Punjab NWFP Quality Premium

1990-91 15.75

15.25

15.25 0.19

1991-92 17.00

16.75

16.75 0.22

1992-93 17.75

17.50

17.50 0.22

1993-94 18.25

18.00

18.00 0.22

1994-95 20.75

20.50

20.50 0.27

1995-96 21.75

21.50

21.50 0.27

1996-97 24.50

24.25

24.25 0.27

1997-98 36.00

35.00

35.00 0.32

1998-99 36.00

35.00

35.00 0.50

19992000

35.00

35.00 0.50

36.00

SUGAR RECOVERY Percentage Sindh

Punjab

90-91

9.40

7.72

91-92

9.93

8.62

92-93

9.24

8.22

93-94

9.00

8.14

94-95

9.20

8.44

95-96

9.75

8.10

96-97

9.97

7.94

97-98

9.92

7.97

98-99

8.96

7.80

99-2000

9.18

7.82

Source: PSMA, annual report 2000

MAIN MEASURES FOR IMPROVING SUGAR INDUSTRY HIGH YIELDING VARIETIES OF SUGAR CANE High yielding varieties of cane should be introduced in the agricultural sector. This will bring improvement in cane yield per hectare and will increase in sucrose content. Such varieties will raise the output of Sugar. INITIAL WORKING CAPITAL Nine units are likely to be closed viz. Bachani, Thatta, Dadu, Kiran, Lakana, Tharparkar, Thar, Pasrur and Qaud Ghar. The cause of closure of these mills may be lacking of initial capital, which is imperative for transaction. These mills should be financed by the banks for continuing the operations. This step can increase the output of sugar. DIVERSIFICATION OF EXCESS QUANTITY OF RAW CANE The Raw cane 37.5 Percent instead of 25 Percent is being diversified into seed, and Gur manufacturing. If 25 percent cane is diversified, it can save 12 percent of raw cane and will produce 113,587 tons of sugar resulting in saving of million foreign exchange.

SummaryCONCLUSION

At the time of independence in 1947, Pakistan got two sugar mills as its share. The output of these mills was not sufficient for meeting the domestic requirements. Huge amount of foreign exchange was being spent on the import of sugar. The cane commission was setup in 1957 to form plan for increasing the output of cane and establishing sugar mill in the country. During the period the cultivated area under cane increased at average rate of 10.7 percent, output of cane production rose at average rate of 24 percent and the yield per hectare went up at the average rate 11.7 percent. But the per hectare yield was lower in the country as compared to other cane growing countries. Sugar is a widely used sweetener (90%) and is amongst one of the World's valuable foods; safe, nutritious and palatable. It is the main source of carbohydrates and provides inexpensive calories. Principally sugar is produced from sugarcane or beet sugar. At present, out of a total world production of about 113 million tonnestones, about 65% is produced from sugarcane and the rest from beet. Pakistan is one of the few countries which produce sugar from both sugarcane and beet.

GLOSSARY

REFERENCES www.iarreports.com www.pakistaneconomist.com www.wikipedia.com “The News” news paper www.paksearch.com Pakistan is one of the few countries which produce sugar from both sugarcane and beet.