The Financial Express

Reviewing case of state-run sugar mills

Reviewing case of state-run sugar mills

Permission for large-scale import of sugar causing mounting losses to state owned sugar mills and seriously affecting livelihood means of thousands of sugarcane farmers is  not just shortsighted but  thoughtless, according to many observers. As traders are gaining hugely from low international market prices, the state-owned sugar mills are left with no choice but to sell their sugar at prices far lower than production cost.

The government seems convinced that keeping the market stable through huge imports weighs much heavier than revamping the mills to raise productivity and reduce production cost. No doubt, there is merit in thinking that way. But what about the fate of the mills and the workers and sugarcane farmers dependent on them?

Although there were announcements of modernising the sugar mills and some moves were reportedly taken, the state of the mills has not at all improved and even deteriorated-- to the point that there are rumours that the government is going to privatise the state-owned mills. Industries minister Nurul Majid Mahmud Humayun, however, told parliament recently that the government has no plan to shut down the state-owned sugar mills, though the threshing of sugarcanes in six mills out of total 15 has been kept suspended for the current season. He said that there were 15 sugar mills under the Bangladesh Sugar and Food Industries Corporation. Of these, only one -- Carew and Co (Bd) Ltd -- is profitable, he said, adding that sugarcane threshing in six mills was kept suspended for the 2020-2021 season. In reply to a question from a lawmaker, the minister said that the government was implementing two development projects to modernise the sugar mills in order to save the country's sugar industry.

Loss making sugar mills have been a burden on the government for long. Attempts to reenergise them by way of increased productivity and profitability have not produced any worthwhile result till now. In fact, government efforts in this direction are also questionable, as whatever stray moves were taken did not actually mean to bring any major improvement in the overall performance of the state-run sugar mills. Like most other state-run entities burdened with losses, wastefulness and inefficiency, the sugar mills have also earned the white elephant tag, requiring hefty funds from the government exchequer every year to pay for their mounting losses. It is uncertain whether the recent move to pump in funds for refurbishing the sugar mills with newer technology is going to do any good, given the need for large-scale renovation. 

A news report published in a local English daily says sugarcane cultivation in the country fell by 45 per cent to slightly over 48,000 hectares in 2019 from more than 88,000 hectares in 2002, leading to over 66 per cent fall in the production. In 2019, about 69,000 tonnes of sugar was produced compared with 2,04,000 tonnes produced in 2002. According to the report, in the 18 years since the sugar import was allowed, the Bangladesh Sugar and Food Industries Corporation (BSFIC) saw profit only once, in 2005-06.

At present, Bangladesh can meet about 5.0 per cent of its annual demand for sugar through domestic production. It has to spend more than Tk 50.0 billion a year to import sugar to meet the annual domestic requirement for over 2.0 million tonnes, according to estimates. BSFIC which is supposed to keep the domestic sugar price stable, has the capacity to produce only two hundred thousand tonnes of sugar a year. But dearth of supply of sugarcane has become a major problem for the 15 state-run mills to run full capacity.

One of the key issues that should have been looked into long back but not attended to so far is that with only three-four months of productive operation, the sugar mills cannot be expected to avoid loss. Another issue that goes with this is that increasing productivity is dependent on sugarcane harvest. Thus the choice is to diversify production. Experts hold that in the context of Bangladesh, only sugar production cannot make a mill viable. Proper utilisation of by-products of sugar should be explored to make these mills profitable.

Running these mills profitably is very crucial, perhaps even more than domestic market intervention, as around half a million sugarcane farmers depend solely on these mills for their livelihood. Thus sustaining these mills is equally important to ensure the well-being of a large number of people dependent on them; and this can only be expected to be achieved by running these mills efficiently and innovatively, also taking into account the inherent lacunas not addressed for decades.

In view of the prevailing situation, especially the tiny portion of local demand that the state-run mills are able to cater to, hoping for the mills to substantially increase their share in domestic market is a far cry. Still, sustaining the mills with whatever little they produce should be a matter of priority for the authorities concerned.

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