Overview of Sugar Industry in Pakistan Reseatch & Development Department The Lahore Chamber of Commerce & a betel tna‘Compiled by: KAMRAN SAEED Deputy Director Research & Development Department ‘The Lahore Chamber of Commerce & Industry 11-Shahrah-e-Aiwan-e-Tijarat, Lahore, Pakistan Phone: +92-42-111-222-499 Fax: +92-42-36368854 Acknowledgements: I would like to thank the Secretary General and the members of my team i.e, Ms Sidra Khan, Mr Furgan Hanif, and Ms Nadia Abbasi for their continuous support and encouragement throughout the compilation of this report. Disclaimer All information provided in this report is obtained from sources believed to be reliable and in all ceases the reference has been quoted. We do not make any representation, warranty or assurance nor assert that all the information provided therein is absolutely accurate or complete and it should not be relied upon as such. LCI and its staff is not responsible for any error of fact, opinion or recommendation and also for any loss, financial or otherwise, resulting from business or trade or speculation conducted, or investments made on the basis of information posted here in this report. Reading this report stipulates that you have also read this disclaimer. ‘The Lahore Chamber of Commerce & Industy | Overview of Sugar Industry in Pakistan EAPreface ‘The Sugar industry in Pakistan is the second largest agro based industry after Textiles. Pakistan is an important cane producing country and is ranked fifth in world cane acreage and Oth in sugar production. The share of sugar industry in value added of agriculture and GDP are 32 percent and 0.7 percent, respectively: The sugar sector constitutes 4.2 per cent of manufacturing. It employs over 1.5 million people, including management experts, technologists, engineers, financial experts, skilled, semiskilled and unskilled workers. Considering this paramount importance of sugar industry, itis imperative to assess the ‘current state of sugar industry and formulate recommendation for its improvement. The section 1 of this report describes the production of sugar and the sugarcane crop in Pakistan. Section 2 tells about the major producers of sugar in each province, while section 3 gives the current picture of the domestic consumption of sugar in Pakistan, Section 4 and 5 depict the yearly trend of exports and imports of sugar respectively. Section 6 outlines the important role of sugar of industry in power generation. Section 7 describes the factors that are critical to the suece: sugar industry, while section 8 tells about the value addition areas of sugar in Pakistan. Section 9 sheds some light on issues/risks faced by the sugar industry, while section 10 gives some recommendations for enhancing the production in the industry. Finally, section 11 gives a picture of the global sugar scenario. ‘The feedback of industry experts is also included in the report. To keep the report simple and easy to read, the analy sis kept concis and done mostly in bullet poie Most of the data used in this reported has been collected from Pakistan Sugar Mills Association, USDA, Jconomie Survey of Pakistan, Pakistan Bureau of Statistics and other miscellaneous sources Where otherwise mentioned, the data is presented by sugar year (Oct- Sept). The Lahore Chamber of Commerce & Industry | Overview of Sugar Industry in PakistanTable of Contents 2, Major Producers- 3. Domestic Consumption - 4, Exports 5. Imports 6. Role of Sugar Industry in Electricity Generation- 7. Critical Success Factors. 8. Value Addition Areas in Pakistan- 9. Issues/Risks Faced by Sugar Industry-~ 10. Recommendations. 11. Global Sugar Scenario- The Lahore Chamber of Commerce & Industy | Overview of Sugar Industry in Pakistan© Pakistan’s 2012-13 (Oct-Sep) sugar production is estimated at 4.7 million metric tonnes in addition to 1.3 million metric tonnes of beginning stocks, making for a total 2012- 2013 sugar supply of around 6.0 million metric tonnes. The exact figures for sugar production in 2012-13 would only be known after the end of sugar season in ‘September:The higher production of sugar in 2012-13 (as compared to 2011-12), coupled with carryover stock of previous year has created a surplus of sugar, resulting in keeping the price of sugar in check. © The sugar production during 2011-12, by the close of crushing season was 4.638 million metric tonnes. This was above the forecast of 4.4 million metric tonnes by the Pakistan Sugar Mills Association, The yearly trend in the last few years can be seen in the chart below. Figure 1: Total Sugar Production (mmt) 2006-07 2007-08 2008-09 2009-10 2010-41 2011-12 Source: Pakistan Bureau of Statistics ©The sugarcane production in 2012-13 is reported at 62.5 million metric tonnes against the target of 59 million metric tonnes set by Pakistan Sugar Mills Association. This is 5.9 % higher than the 2011-12 produce of 58.4 million metric tonnes. The trend in the last few years can be seen in the chart below. Figure 2: Sugarcane Production (mmt) 0 4 oo} so | ao} so | 20} 104 2006.07 2007-08 2008-09 2009-10 2010-11. 2011-12 2012-13, Source: Pakistan Bureau of Statisties ‘The Lahore Chamber of Commerce & Industy | Overview of Sugar Industry in Pakistan EA“The main factors contributing to increase in sugar production are © More area brought under cultivation due to economic returns received by the growers. This resulted in better sugarcane availability and hence more sugar production. © Timely availability of inputs also encouraged the farmers to grow more sugarcane crop. oR ane varieties atively better sugar 2s compared to previous years compared to other crops has lured many other © Better price of sugarcan agriculturalists over the cats to grow sugarcane. ‘The sugarcane plantation area in 2012-13 is 1124 thousand hectares, which is 6.2% higher than the 2011-12 sugarcane plantation area of 1058 hectares. The yearly trend in the sugarcane area of cultivation, production and yield/hectare is shown ahead in the table 1. TABLE1 Area, Production & Yield of Sugarcane Your SH “Change | (000 Tomes) | 4% Change | (KevHlec)_[_% Change 08. z 50045 _ 5659 > 2009.10 al 49373 3 52357 77 201041 EH 35308 120] 55981 6 sor 7 38597 a 55196 as 2012-14) 2 e472 io] 55580 o7 ‘Souce: Palisa Bueas of Saisie Provisional y-March) cup of the sugar produced in 2011-12 is shown below in table 2. TABLE 2 ‘The detailed bre Detailed break-up of sugar produced in 201112 ‘Sugarcane plantation 1,057,000 hectares Sugarcane produced 58,038,000 tonnes Sugarcane crushed (with 81.7 % utilization) 48,038,612 tonnes Sugar produced from cane 4,638,361 tonnes Sugar produced from beet 18,216 tonnes Total Sugar Produced 4,656,577 tonnes Carryover stocks (Mills & TCP) 1,109,321 tonnes Availability for 2011-12 898 tonnes iF Mills ‘Source: Pakistan S The Lahore Chamber of Commerce & Industry | Overview of Sugar Industry in Pakistan2. Major Producers: © According to 2011-12 data, the largest sugar producer in Pakistan in terms of combined production of all the units is JDW sugar mills, with the combined production of JDW-1, JDW-IL and JDW-IIL over 500,000 tonnes. HAMZA sugar mill is on second number with production of around 309,000 tonnes. Shakarganj Sugar Mills is on third number with the combined production of Shakarganj-I and Shakarganj-II over 173,000 tonnes. The province-wise production of each mill, including the recovery percentage is shown ahead in tables 3, 4, 5 and 6, TABLE3 Milkwise Sugarcane Crushing, Sugar Production, Recovery % And Molasses Production for the season 2011-12: PUNJAB ‘No Name ‘No of Cane Prod Rec Molasses Ree Days Crushed Tonnes % Production % T__ Abdullah(Depalpur) SHSS 50205 «O23 DRTOT 455 2. Abdullah(Shahpur) 425,776 378568 8D 19373 455 3. Adam 503,558 S580 823,700 453 4 Ashraf 135761237 77,3907 38,685 445 5. Baba Farid 154 342,174 32,002,943 5,569 455 6 Brothers 518429 53,229 10.27 "25,589 455 7. Chanar 566.274 53,060 937 28,768, 455 8. Chaudhry 122492527 4710 9.56 22,422 456 9 Chishtia % 4375 60133310 455 10 Colony(Phalia) 523,238 46,800 896 *23,807 455 11 Colony(Punjab) 550079 54287 887 *25,029 455 12 Bthad 141100442 104,690 1042—41,691 45 13 Fatima 108,718 103,119 9.53 49,218 455 14 Feeto 630,406 53,240 BAA 28,686 455 15 Hamva 2.996014 308,922 131 "136,319 4.85 16 Hag Babu 306,581 30089981 13,949 455 17 HLWagas 478195 BBL 808 #21,758 455 18 Huda (Fauji) 408,658 39,440 9.65 18,594 455 19 Hunza (I) 573.238 52086 9.09 26,082 455 20 Hunza (li 507,210 28024912 3,978 455 21 Husein 121 650,995 61129939 28,634 440 22 Indus 142 1,116,789 122,156 10.94 42,440 3.80 The Lahore Chamber of Commerce & Industy | Overview of Sugar Industry in Pakistan EA23° Tetefag 119470727 42,755 9.08 20,771 44 24 DWI 1422711463 272,296 10.04 115,783 427 25 JDW-I (United) 135 1,062,742 108864 10.24 45,730 430 26 Kamalia 885,409 85,764 TL 40,195 455 27 Kashmis 122 627,538 6DAS4 9.63 28,208, 450 28 Kohinoor 27,690 833 "19,460 455 29 "The Thal Ind. Uniti 1,008,822 950 "45,901 455 Cayyah) 30 Macea TOA 850 *3,190 455 31 Madina 617,550 10.00 *28,099 455 32. National 373,661 869 "17,002 455 33, Noon 701,850 089.36 5.01 34 Pattoki 114 616,215 62,755 10.48 128,038 455 35. Ramzan 375,795 37,330,993 17,099 455 36 RY.K 142 1,123,682 114,895 10.22 46,515, 4nd 37. "The Thal Ind. Uniti 63658 9.65. 30,018 455 » Sab omar Rat 9697485 39 Shakarganj (I) 1,223,224 108088 8B *59,145 455 40 Shakargaaj (1D) THIS 65,532 8.93 33,403 455 41 Shamim 163,658 14,660 8.96 17,446 455 42. Sheikhoo 1,405,792 128, 914 *63,964 455 43° Tandlianwala- I 457.218 43311 9.47 20,803 455 4° Tandlianwala- IT 659,737 63475 9.62 30,018 455 Total 201-12 32,203,007 3,116,348 9.68 1,445,830 4.49 Total 2010-11 27,890,459 2,598,085 9.32 1,249,324 4.48 ‘Sourcer Pakistan Suga Mills Assocation,” Estimated The Lahore Chamber of Commerce & Industry | Overview of Sugar Industry in PakistanTABLE4 Milkwise Sugarcane Crushing, Sugar Production, Recovery % And Molasses Production for the season 2011-12: SINDH No Name No of Cane Prod Rec Molasses Ree Days Crushed Tonnes. % ~——Production —% T__AFAbbas wast BAT) 91197 a4 2. Abdullah Shah Ghazi 169,492 16582 9.78 11,500 678 3. ALNoor 885,101 88,058 9.95 40,630, 459 Ao Ansari 428,693 35810835. 19,350 451 5. Armywelfare 280,620 297199714090 502 6 Bawany 318,868 26099 BIT 14,462 454 7. Dehaski 751,262 77,634 1033. 36,812 490 8. Dewan 544,198 SIg3s 983 27,210 5.00 9 Digs 272,295 259384 952 14,164 5.20 10° Faran 597.428 56999 954 29,075 490 11 .DW II Ghotki) 1.135063 120,721 1064 52,213 4.00 12, Habib 851,620 1,831 1078 39,539 464 13 Khaispur 402,177 34425856 17,258, 429 14 Khoski 187,181 145 80994020 482 15 Kiran 183,376 158358638343 "4.55 16 Matiaci 123 442,261 44098997 20,380 4061 17 Mehran 104 722,120 74,201 10.28 36,563 5.06 18 Mispuckhas, 96 407,734 47,566 147 24,500 5.24 19 Mirza 69 162,390 16,050 9.878.042 494 20 Naudero 129 230,761 20,000 8939511 a2 21 New Dadu 113. 327,879 29.738 9.07 15,580 495 22 Pangrio 59 116,209 10698 9.20 5,600, 482 23 Ranipur 400,700 36,095 9.01. 18,032 450 24° Sakrand 59,968 9.75 23,800 4.25 25 Sanghar 483,352 962 23,201 4.80 26° Seri 65,452 858 2,978 455 27. Shahmurad 87 566,077 10.08 28,889 5.10 28 Sindabadgar 89 331,064 30,790 9.30 18,600 5.62 29 ‘Yando M. Khan 118 100345 8.804 877 5,409 539 30 Tharparkar 234834 20,090 8.55 11,855 5.05 31 SGM 338,130 35,000 10.05 15,385 455 32. ‘Yando Allahyar 73,125 5091 696 3,291 450 Total 20112 5,040,210 1,267,050 9.72 624,954 «4.80, Total 201041 13,600,800 1,298,989 9.42 643,651 4.73, ‘Sourcer Pakistan Sugar Nils Association The Lahore Chamber of Commerce & Industry | Overview of Sugar Industry in PakistanTABLE 5 Milkwise Sugarcane Crushing, Sugar Production, Recovery % And Molasses Production for the season 201412: KHYBER PAKHTUNKHWA No Name No of Cane Prod Rec Molasses Ree Days Crushed Tonnes. % Production % 1 APMoiz Dea RTs 930167 155 2. Chashma 113 778,350 67170863 36,259 465 3. Chashma (Exp) no 417,85 36310 869 19,870, 476 4. Khazana 106 279,363 27505985 11,850 43 5. Premier 132,249,163 2909.95 11,332 6 Tandlianwala 122 465,491 39015 838 29.093 (Zamand) 7 Bannw 118,869 9,745; 82 5,409 4 Total 201-12 3,005,318 268,766 8.94 ‘145,191 4.85 Total 2010-11 3,035,460 275,685 9.08 «= 141,580 4.66 ‘Souscer Pakistan Sugar Mills Association;” Estimated TABLE 6 Milkwise Sugarcane Crushing, Sugar Production, Recovery % And Molasses Production for the season 201412: KHYBER PAKHTUNKHWA No Name No of Beet Prod Rec Molasses Ree Days Sliced Tonnes % Production % 1 AlMoiz 135,585 TaaT 08076005 307 2 Premier 30 43,124 3,789 879 "1,699 304 Total 2010-12 176,709 18216 10.31 8,392 475 Total 2010-11 151,265 13,535 8.95 (7,027 4.48 ‘Souscey Pakistan Sugat Mills Assodationy’ Estimated The Lahore Chamber of Commerce & Industry | Overview of Sugar Industry in Pakistan© It will also be useful to look at the province-wise production summary. Punjab is the highest producer of sugar with production of 3.1 million metric tonnes approx, followed by Sindh with total production of 1.25 million metric tonnes. KPK lags behind considerably with production of around 287,000 tonnes. The province-wise production is summarized below in table 7. TABLET Province-Wise Total Production Of Pakistan Prox Cane Raw Beet Sugar Production Total Molasses Crushed Sliced (Cane) (Raw) Beet) _ Production Punjab 32,203,007 3116S SIGS TSAO Sindh 13,040,210 1,250,036 1.250036 624,956 KPK 3,005,318 176,709 268,766 18,216 286982 153,388, Total 48245555 T7OT09 4,652,108 TAG 4,670,380 224309 2one12 Total 44,526,719 42,360 151,265 4,119,516 39,678 13,535 4,172,729 2,034,555 2010-11 ‘Souscer Pakistan Sugar Mills Assocation’ iber of Commerce & Industry | Overview of Sugar Industry in Pakistan The Lahore C!3, Domestic Consumption: © The sugar consumption for the sugar year 2012-13 is estimated to be around 4.4 million, metric tonnes. The exact figure would be known afer the end of sugar year in September. Total consumption of sugar over the years is inereasing mainly due to growing demand by the processed food sector. Bulk sugar consumers such as bakeries, candy, ice cream and soft drink manufacturers account for about 60 percent of the total sugar demand. © The sugar consumption in 2011-12 was 4.385 million metric tonnes as compared to 4.096 million metric tonnes in 2010-11, The average monthly consumption in 2011-12 was hence 365,688 tonnes, \s compared to 341,367 tonnes in 2010-11. The yearly trend is shown below in the graph. Figure 3: Sugar Consumption mmt 444 424 38 4 36 2006-07 2007-08 2008.09 2009-10 2010-11 -2011-12 Source:Economic Survey of Pakistan The kg per capita consumption in 2011-12 was 24.57, as compared to 23.12 in 2010-11. “The trend in the recent times in per capita consumption is shown below in the bar chart Figure 4: Sugar Consumption Kg Per Capita 20. —_—__—___—_,, 2006.07 2007-08 2008.09 2909.10 2010-11 2011-12 Source:Economic Suevey of Pakistan ‘The Lahore Chamber of Commerce & Indust | Overview of Sugar Industry in Pakistan EES4. Exports: © The sugar export quota for the year 2012-13, set by the Economic Coordination Committee of the Cabinet (ECC) is 1.2 million tones, An inland freight subsidy of Rs L /kg ($18/ton) for the export of sugar has also be 2012-2013 (Oct-Sep.) would be 895,000 approved Previously, the ECC announced that the export quota for sugat y tonnes, however, at that time no freight subsidy was considered, According to USDA sugar update, Pakistan has exported approximately 500,000 tonnes of sugar since October 2012, leaving up to another 700,000 tonnes to be exported under the new policy © During sugar year 2011-12 (Oct-Sep), the Government of Pakis in allowed export of 200,000 tonnes of sugar but the State Bank of Pakistan reported physical export of only 109,000 tonnes by 30” September 2012. © According to P follows. SMA, the main reason for exporting below the allocated quantity is as ss instead of © The State Bank of Pakistan also entertained paper con registering contracts only against letters of credit and ad \ce payment. ‘This resulted in premature exhaustion of quota and discouraged the exporters, be iy trend in the export of sugar in the last fifteen years (fiscal year wise) seen below in table 8. TABLES Export of Sugar “Fiscal Year Quantity (Tonnes) Value in “000” Avg price Rs/Tonne _ Rupees 997-98 210,632 13,157 1998.99 906,602 12,739 1999-00 2000-01 2001-02 2002.03, 45,669 627,949 13,750 2003-04 116,175 13,670 2004-05, 54771 18,782 2005-06 61,047 2600 2006-07 2 27,500 The Lahore Chamber of Commerce & Industry | Overview of Sugar Industry in Pakistan B2007-08 2008.09 2009-10 2010-11 2011-12 260,840 980) 48,672 5,738,856 639,677 2,575,403 Source: Pakistan Bureau of Statistics The Lahore Chamber of Commerce & Industry | Overview of Sugar Industry in Pakistan5. Imports: A few years ago, sugar was imported in both the raw and refined form. After 2007-08, sugar is imported only in refined firm, after attaining self sufficiency in raw sugar. © One thing unique about sugar import is that it has to be made at the right time for it to be effective in keeping the price of sugar at a reasonable level. Management of import timing, late releases of stock by Trading Corporation of Pakistan and certain millers during the season can have a negative effect on the price market impact and may contribute to an upward spiral in the price of sugar. © The import of refined sugar in FY 2011-12 was 17,221 tonnes, a big drop from the FY 2010-11 imports of 1,031 million metzie tonnes. ©The yeanly trend in the import of refined sugar in the last fifteen years (fiseal year wise) can be seen below in table 9. The abnormal figures for sugar import in FY 2010-11 indicate that a severe sugar shortage was prevalent in the country at that time. TABLE Import of Refined Sugar (Tonnes) Value in “000” Avg price Rs/Tonne Fiscal Year Quanti 1997-98 10.990 1998.99 10,097 152,591 1999-00 66,627 769,179 2000-01 930,142 14,488,243 2001-02 85,037 1,472,326 17,314 2002.03, 8315 152,746 18,370 2003-04 11,398 188,509 16,539 2004.05, 266,707 5,288,976 19,606 2005-06 1,527,322 37,365,929 24,465 2006-07 586,543 15,721,704 26,804 2007-08 36,692 912073 24,858 2008.09 125,743 4.505407 35,830 2009-10 370,000 14,811,000 40,029 2010-11 1,031,919 58,669,007 56,854 2011-12 17,221 1,166,825 67,156 Sourcer Pakistan Bureau of Statistics The Lahore Chamber of Commerce & Industry | Overview of Sugar Industry in Pakistan6. Role of Sugar Industry in Electricity Generation: * According to recent estimates, around 2,000 MW of electricity can be produced in the on. Most of the sugar mills in Paki an consume bagasse in heating inefficient boilers of 26 bar. The Indian sugar mills have installed 50 bar or above boilers that produce many times more electricity 7. Critical Success Factors: © Quality and Quantity of Sugar Production: The first critical success factor of sugar industry in Pakistan is the amount of sugarcane under cultivation which in turn is highly dependent on the quality of sugarcane crop. If the yield from sugarcane is low, then the unit cost of production inere cs for the sugar manufacturing units and direetly impacts their profitability © GOP Policies: GOP (Government of Pakistan) policies are very critical in success of sugar industry. If the government policies are supportive (Jess restrictive), then a lot of investors ar attracted to the industry. Unsupportive and restrictive government policies can turn the investors away from sugar industry ie. untimely import or restriction an export of surplus sugar. This ean ereate an artificial shortage or glut in the market hence affecting the prices and demand. © Banking Facilities: Banking facilities available to sugar producers are a very important factor in the success of sugar industry. If good banking facilities are easily available, it ean result in timely purchase of sugarcane and holding of sugar stocks. © International and local Supply/Demand Scenario: Success of sugar industry in Pakistan also depends highly on the local and international supply/demand scenario. The industry should be strong on the supply side so that it can fulfil the local and international demand and also take advantage if there is an international supply shortage. ¢ Management Quality: Successful sugar companies have very good management quality ‘The management of successful companies is very active in reacting to different market situations, If all the units working in the industry have good management qu: ty, then it also plays very important role in the suceess of industry The Lahore Chamber of Commerce & Industy | Overview of Sugar Industry in Pakistan ER8. Value Addition Areas in Pakistan: © There is good value addition of sugarcane by-products like Molasses and Bagasse. Molasses is used in production of ethanol, which in turn is used in various industries like id reduces paint, medicines and explosives. Its use as a fuel increas s engine efficieney pollution, 4 Bagasse is used for paper and chip board manufacturing, There is also a great scope of Bagasse in co-generation of power, as described in section 6. ¢ Straw and Board industry also makes a very good use of the waste by-products of sugat. Food and Beverages industry make a heavy usage of sugar Sugar is also used in the confectionary industry in the making of candies, chocolates and. lollipop: ‘© Sugar is also used in the making of juices, jams, biscuits and sweets (Mithai) industry © Cordial industry makes heavy use of sugar in the brands like “Rooh Afza” and “Jaam-a- Shirin”. ¢ Exportable sugar in different packings ie. 2 kg bags, cubes ete. The Lahore Chamber of Commerce & Industry | Overview of Sugar Industry in Pakistan ry9, Tssues/Risks Faced by the Sugat Industry: © Most sugar producers complain that Government does not do a proper analysis of their costs when fixing the sugar price. They complain that sugar price is not increased in the of same proportion as the support price of sugarcane erop and other costs ie, cos chemicals used, high energy cost, and high cost of technical and general labor. This factor has eroded the profit margins of the mills and caused severe liquidity problems. As a result, it has limited the mills’ ability to pay farmers during the crushing season, In many cases, mills are unable to clear theie legal liabilities. The banks are also reluctant to advance to th sugar mills in view of the general situation, Depressed international prices, due to a glut like situation worsens the scenario. A province-wise comparison of the sugarcane support price with the retail price of sugar is done in the table in Annexure B. Low sugar recovery percentage due to sugarcane varieties that have low sucrose content and are not res :nt to disease and pests. The provinee-wise recovery percentage of each sugar mill in 2011-12 can be seen in the tables 3, 4, 5 and 6 in section 2 It can also be seen from the graph below that in the last 15 years, no province has been able to show a substantial improvement in the sugarcane recovery percentage. It can be seen that owing to suitable weather, Sindh has had relatively better recovery percentage as compared to other provinces Figure 5: Sugarcane Recovery Percentage 1997-98 to 2011-12 1057 10 } 95+ oT Recovery % Pakistan 854 Recovery % Punjab 5 Recovery % Sindh Recovery % KPK 754 a The Lahore Chamber of Commerce & Indust | Overview of Sugar Industry in Pakistan ESSince sugarcane is a kharif crop, the erop’s performance is dependent upon timely availability of irrigation water. The availability of water as an essential input for Khari 2012 was 14 percent less than the normal supplies but compared to Kharif 2011, it was 44 percent less. Adverse performance of sugarcane crop due to insufficient rain or floods has a direct detrimer effect on the production of sugar. In absence of adequate water, the high operational cost of the tube-wells that are run on diesel makes the sugar industry uncompetitive. @ Dezoning: Since dezoning, the incentive of sugar mills to direct resources for development of good variety cane in its area has almost diminished because the grower who has borrowed money from a particular sugar mill for development is free to take his sugarcane to any mill irrespective of which mill advanced the loan for development. © Per hectare yield of sugarcane in Pakistan is quite low regionally and globally. According to experts, water shortage, absence of high yield varieties of seeds, inadequate input of fertilizer, lack of proper spraying of insecticides and pesticides and lack of effective research and development are the basic causes of low per hectare yield of sugarcane in Pakistan, The two consecutive floods in 2010 and 2011 have also disrupted the agricultural produetivity of the country in general. ‘The province-wise yield per hectare along with utilization percentage of the mills is shown ahead in table 10, TABLE10 Sugarcane Plantation Area, Yield per Hectare and Utilization % Province Year “Area Production Yield per Utilization % Hectares Tonnes Hectare By Sugar Mills Punjab DIETZ 761,200 12,893,000 56.34 75.07 2010-11 37,481,000 55.75 7437 Sindh 2011-12 245,000 14,455,000 59 92.02 2010-11 226,500 13,900,000 60.43 97.84 KPK 2011-12 94,400 4,325,500 45.82 6947 2010-11 88.400 4,030,300 45.59 7531 Pakistan, 2011-12 1,046,000 58,038,200 55.48 83.13, 2010-11 987,700 55,442,100 56.13 80.47 Source: Pakistan Bureau of Siaisiesy Estimated © Sugar mills in the high sugareane and low sugarcane recovery sts pay the same support price of sugarcane. This makes it hard for sugar mills in the low sugarcane recovery The Lahore Chamber of Commerce & Industry | Overview of Sugar Industry in Pakistanregions to compete with the sugar mills in the high sugarcane recovery region, due to a significant difference in their profit margins. © Transportation is an essential element of sugarcane production-distribution chain, The road network around many sugar mills is not good, despite the collection of road cess by the provincial government, ‘This increases the transportation cost of transporting sugarcane from the farm gate to mills. The distance of sugarcane transport from field to sugar mill is an important indicator, which affects the competitiveness of the sugar ind of stty. For instance, if the distance of sugarcane transport is large, the transportation and management will be high. © According to commodity traders and market analysts, the ECC decision to expost 1.2 million metric tonnes of sugar is misguided as it could seriously erode stocks, depending on the rate of exports, and ultimately lead to higher domestic sugar prices. It can result in a precariously low level of ending stocks at 400,000 tonnes, enough to supply Pakistani consumer demand for only 40 da ‘This is compared to a total average annual ending stock of approximately 1 million metric tonnes over the past five years, sufficient to meet three months worth of consumption needs. The sugar producers however do not agree with this notion and say that there is enough sugar production to fulfill the domestic demand and also meet the export target set by ECC. The Lahore Chamber of Commerce & Indust | Overview of Sugar Industry in Pakisan ES10. Recommendations: ‘The price of sugar and the support pricing of sugarcane crop should be based on better data analysis in view of all economic factors like increase in prices of inputs and other to protect the interest of all stakeholders equitably. The support price of suga e in every region should vary according to its sugarcane recovery percentage. This would allow sugar mills in the low sugarcane recovery regions to compete with the sugar mills in the high sugarcane recovery regions. Similarly the price of sugar should be set keeping in s ie. cost of chemicals view the increase in support price of sugarcane erop and other cos! used, energy cost, and cost of technical and general labor ete. ‘To deal with the problem of low per hectare yield and low sugar recovery percentage, combined efforts of government and sugar mills are needed for © Adoption of improved varieties of sugarcane possessing high sucrose contents and resistance to disease and pests through Agriculture Research Institutes. © Demonstzation plots of promising varieties on farmers fields, This would also help in educating the farmer about using new improved varieties every year to boost production, © Launching special campaigns of planting desirable varieties during planting on, © Formation of avigilant cane department in each mill, which should see that fresh ‘cane supplies from the fields are brought to the mills on the very same day these are cut by the farmers. They should be advised to transport their cane to the mills oon as possible to avoid losses of weight and of sucrose content. © Appropriate use of fertilizer and proper spraying of ins cticides & pesticides. ‘The problems caused by De-zoning can be solved by adopting zoning system which is demanded by all sampled sugar mills of Pakistan ‘The Government should give subsidy for Solar-Agri tube wells through easy financing to save the sugarcane growers from the high operational cost of diescl-run tube wells when the availability of water is not sufficient. This would help the Government in ensuring adequate supply of water to the sugarcane growers, Considering the glut like situation in the domestic and international market that has resulted in depressing the price of sugar, the Government can consider putting a temporary ban on the capacity enhancement of existing sugar mills. This can be done The Lahore Chamber of Commerce & Industy | Overview of Sugar Industry in Pakistan ESparticularly in the areas with high sugarcane recovery percentage to stop the mills in those areas to misuse their inherent advantage. ‘© More efficient use should be made of the road cess collected ftom the sugar mills by the provincial governments. It should be made sure that every sugar mill has a good network of roads around it to save from delays and hike in transportation cost. The Lahore Chamber of Commerce & Industry | Overview of Sugar Industry in Pakistan1, Global Sugar Scenatio: ¢ Global Sugar output has increased from 149 million metric tonnes in 2008-09 to 173 million metric tonnes in 2011-12. Brazil was the highest producer of sugar in 2011-12 with production of 37.15 million metric tonnes, followed by India with production of 27.96 million metric tonnes and European Union with production of 18.12 million metric tonnes. Pakistan ranked 9" in terms of sugar production, with production of 4.638 million metric tonnes. © Global exports in the year 2011-12 stood at 53 million metric tonnes. Brazil was the largest exporter of sugar with net exports of 25.81 million metric tonnes, followed by ‘Thailand with net exports of 6.99 million metric tonnes. India ranked 3” with net exports of 2.84 million metric tonnes © Global sugar consumption in 2011-12 stood at 168.29 million metric tonnes. India was the largest consumer of sugar with consumption of 23.13 million metric tonnes, followed by European Union, with consumption of 19.24 million metric tonnes. China ranked 3 with consumption of 14.80 million metric tonnes. Pakistan ranked 8" in terms of sugar consumption in 2011-12, with consumption of 4.385 million metric tonnes. © The largest importer of sugar in 2011-12 was USA, with net imports of 4.25 million metric tonnes, followed by European Union with net imports of 3.25 million metric tonnes. China ranked 3" with net imports of 2.89 million metric tonnes. The Lahore Chamber of Commerce & Industy | Overview of Sugar Industry in Pakisan EEAANNEXURE A: Trend in Domestic Monthly Retail Sugar Prices Rs/Kg 85 78 65 55 45 35 25 15 ‘ LS dS GF OO OG 8 > LEP EE PSE SEE EES SES PEE SE Source: Pakistan Bureau of Statistics ‘Trend in International Trade Market Monthly Refined Sugar Prices US $/Tonne 750 650 550 450 350 250 150 Oct Apr Oct Apr Oct Apr Oct Apr Oct Apr Oct Aor oct Apr Oct Apr Oct Apr Sep 03 04 04 05 05 05 06 07 07 08 08 09 09 19 19 11 11 12 12 Source: LIFFEE LONDON/ISO ‘The Lahore Chamber of Commerce & Industy | Overview of Sugar Industry in Pakistan EEAANNEXURE B: SUGARCANE INDICATIVE PRICE IN COMPARISON WITH SEASON'S AVERAGE RETAIL PRICE, YEAR PUNJAB SINDH KPK AVG SUGAR RETAIL PRICE/KG 2000-07 35.00 36.00 35.00 26.73 2001-02 42.00 43.00 42.00 22.00 2002.03, 40.00 43.00 40.00 19.83, 2003-04 40.00 41.00 40.00 19.26 200405, 40.00 43.00 40.00 25.31 2005-06 45.00 60.00 45.00 33.07 2006-07 60.00 67.00 65.00 30.60 2007-08 60.00 67.00 65.00 28.62 2008.09 80.00 81.00 80.00 43.39 2009-10 100.00 102.00 100.00 6341 2010-11 125.00 127.00 125.00 72.82 2011-12 150.00 154.00 150.00 57.16 2012-13, 170.00. 172.00. 170.00. Sugarcane Indicative price is per 40 Kg, Retail price is season's Average Source: MINFA/ALMA The Lahore C! imber of Commerce & Industry | Overview of Sugar Industry in Pakistan