3/19/25, 11:32 AM Analysis of Sugar Industry and Shortfall of Sugar – Khilji & Company

Analysis of Sugar Industry and Shortfall of Sugar

Currently, Pakistan is termed as amongst top 20 countries in terms of area under cultivation of the sugar cane crop, and
production, however, this top ranking takes a nose dive, when actual yield is considered worldwide. At the moment,
approximately 72 sugar mills are operating in various parts of the country to cater to the needs of people. Sugar
apparently is also the second most important cash crop in Pakistan after wheat. Despite having this self sufficient
production, Pakistan has to import sugar, which exposes it to the effects of shortage and rising prices in the world.

This blog extensively discusses in detail the factors responsible for the shortfall of sugar in the market. These factors
which are taken into account here are ranging from political, administrative, technical and logistic nature. Due to these
factors in due course of time the total area under cane production has decreased due to some other issues like
monopolistic attitude of the mill owners, water shortage, behavior of the mills’ management, late payments, increased
input cost, and diseases and rodent attack.

Pakistan is an agricultural country, and agriculture is the backbone of economy. Sugar sector constitutes 4.2 per cent of
manufacturing. Pakistan is one of the main producers of sugar worldwide. 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 deficit was met through import of sugar from abroad 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 mill was
established at Tando Muhammad Khan in Sindh province in the year 1961. Currently there are 81 sugar mills operating in
Pakistan. Allauddin Masood, “Impact of sugar crisis, how the game was played”. Dawn 24 August 2009.

Sugar cane is the primary raw material for production of sugar. After Textiles, sugar industry in Pakistan is the largest agro
based industry, annual crushing capacity of over 6.1 million tones. According to Ministry of Industries and Production; total
crushing capacity of Sugar mills in about 505,000 tones per day. The average capacity utilization of the sugar mills during
the last five years remained 70 to 74%. Allauddin Masood, “Impact of sugar crisis, how the game was played”.
Dawn 24 August 2009.

According to Food and Agriculture Organization of The United Nations, sugarcane is grown over a million hectares and
provides 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. Despite, this the average sugar cane yield 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, India70.6, 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 obtained recovery of 10.5%. Board of
Investment, “An Introduction to Pakistan’s Sugar Industry 2008”, Govt. of Pakistan, Production and Yield of
Sugarcane, Economic Survey of Pakistan 2008-09.

It is an important source of income and employment for the farming community throughout the year The sugar industry
employed over 75000 people (approximately), including management experts, technologists, engineers, financial experts,
skilled, semiskilled and unskilled workers. It is the matter of great concern that despite having a strong industrial and
agriculture base, the sugar industry is operating below 70% of its capacity There is a gaping wedge of over 10,000 MT/day
between the demand and supply of sugar, which is the basic cause of recent sugar crisis.

Following factors play pivotal role for disallowing country and countrymen to become a beneficiary of the Sugar Cane crop
instead, of becoming victim.

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Processing

As far as the processing of sugarcane is concerned the farmers cannot process it in the fields or at their own at farm level.
It is the prime duty of farmers to provide the needed quantity of sugarcane to the respective Mill owner. It creates the
monopoly of Mill owner.

Zoning

Zoning is the concept which says that a farmer of specific zone cannot sell its sugarcane to other Mill. Every Mill has
allocated a specific zone and the farmer of that zone cannot sell his sugarcane to somebody else. It again is a tendency
towards monopoly. Adeel Malik, “Sugar and Political Power III”. News, 5 September 2009.

Late Crushing Season

Time of crushing sugarcane is inherently economical. The mill owners usually try to delay the crushing of sugarcane.
There are many reasons why the mill owners manipulate the situation in such a way. It reduce water content in the
sugarcane which affects its weight and hence reduction in price. The other reason is that the farmers tend to operate a
rotating crop pattern. Delays in crushing season pressurize the farmers to get rid of sugarcane as early as possible so that
they can switch to the next crop (often Wheat). This leads to desperate panic selling and hence reduces the price of
sugarcane.

Late payment by Mill owners

Mill owners usually delay payments to the farmers. This tendency discourages sugarcane grower from growing
sugarcane. It is estimated that the Mills owe nearly 25 billion rupees to the farmers. “Sugar and Political Power III”.
News, 5 September 2009.

Transportation of Sugarcane to Mills

According to the Sugarcane Act 1935, it is the duty of mill owners to fetch sugarcane from their respective zones or farms
but the process is entirely different from this. The farmers carry sugarcane assembles in front of mill and wait for their turn
of unloading sugarcane. These tendencies discourage the farmers to opt for water intensive crop. Gradually they are
moving away from the farming of sugarcane to other crops which are beneficial in every respect from low water
consumption to early payment. As a result cultivation of sugarcane is retarding each season.

Industry

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They manipulate the situation in such a way that they get the maximum benefit. In the year 2009 everybody in Pakistan
spent Rs. 550 more, so that the sugar mill owners benefitted Rs. 80 billion more than the previous year’s profit.

Political Elites

Sugar is the second largest Agro-industry in Pakistan. 1980 is the initiating year of sugar crises, when sugar mills were
sanctioned through political connections and state owned banks extended money to finance the industry. After nearly 10
years, 1990, those loans were written off. Hence this economic issue was made political. The fact remains there that 50%
of the sugar producers in Pakistan are influential politicians from all major parties. Adeel Malik, “sugar and politics”.
News, 5 September 2009.

Majority of the politicians in Pakistan are the owners of sugar mills. Almost every mill Board has a member in Parliament.
So in the policy making process these sugar barons influence the policies through their say in parliament. Sugar
requirements are fulfilled by domestic production, import through Trading Corporation of Pakistan and private imports. Mill
owners and their representatives always act in planned and organized way to ruin the public interest.

The Government

Government has failed to adopt measures to tackle this issue. Mismanagement and lack of planning has plunged us into
this crisis. Due to prolonged drought and heat stress, there has been gradual decrease in productivity. This acute shortage
of water resulted in 65% reduction in productivity. Although we are facing acute shortage of water, no attention has been
paid to the construction of dams. Government is also involved in exporting sugar at low prices and at the same time
importing it at higher prices. There is lack of planning at governmental level that they even could not strike a balance
between imports and exports.

Undue intervention of government is also responsible for sugar price hike. Government issues export permits to mills.
When mill owners start exporting sugar then it became difficult to cater the needs of sugar at National level. After
exporting sugar at relatively low prices, government import it at relatively higher prices in case of shortage. Sugar crisis in
Pakistan, http://www.scribd.com/doc/44581257/sugar-crisis in Pakistan

Government tries to control retail distribution below the market price through utility stores. This results in hoarding and
shortage of sugar. Production, consumption and demand plays an important role as production depends on support
prices. Government has failed to strike a balance between demand and supply, so ultimate result is sugar price hike.

Ali Muhammad et.al.,

“Causes of sugar crisis”

Government has failed to maintain a proper price structure, which is one cause of price hike. The price structure is that out
of the sale price 35% of cost goes to farmers and 24% to the Government in taxes 21% to millers with 9 and 6% to whole
seller and retailers respectively. That’s why most of farmers switch from sugar to other profitable crops. Sugar crisis in
Pakistan, http://www.scribd.com/doc/44581257/sugar-crisis in Pakistan

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3/19/25, 11:32 AM Analysis of Sugar Industry and Shortfall of Sugar – Khilji & Company
Public

Believe it or not, public in Pakistan is the third major factor involved in sugar crisis. Pakistani people are fond of sugar and
it’s because of this reason diabetes is common in Pakistan. Consumption trends in Pakistan show that Pakistani nation is
obsessed for sugar.

The statistics shows that per capita consumption as well as overall calorie intake has been rising.

Daily Jang reports

“The sweet obsessed Pakistani nation consumes sugar worth Rs 200 billion annually.

USDA Pakistan Annual Sugar report

states that per capita refined sugar consumption is estimated at 25 kg/person and is based on improved supply and strong
demand. Falling behind Pakistan are other countries of the region like India with 14kg /person, China with 11kg/person,
Bangladesh with 10kg/person.

In last four decades, per capita calorie intake in Pakistan has grown from 1750-2450(kilo) calories with an average annual
growth rate of 0.9%. Sugar consumption has been showing increasing trend for last 15 years. One of the many reasons
behind this increase is rise in total population. Per capita consumption data shows that it has also risen from 22.2 kg in
1995 to 25.8 kg in 2004-5. Now it is 27 kg.

“Sugar crisis in Pakistan”, http://www.scribd.com/doc/44581257/sugar-crisis in Pakistan

SYED ASIM HABIB

Reference:

Sectoral Analysis of Sugar Industry with Special Reference to Price Hike

Directorate General of Training and Research (Inland Revenue) Lahore

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