Sugarcane is tall perennial grasses (family Poaceae, tribe Andropogoneae), native to

warm temperate to tropical regions of the World. They have stout, jointed, fibrous
stalks that are rich in sugar and measure 2 to 6 meters tall. All of the sugar cane species
interbreed, and the major commercial cultivars are complex hybrids.

About 195 countries grow the crop to produce 1.5 billion tonnes. The world's largest
producer of sugar cane by far is Brazil followed by India. Uses of sugar cane include
the production of sugar, Falernum, molasses, rum, soda, cachaça (the national spirit of
Brazil) and ethanol for fuel. The bagasse that remains after sugar cane crushing may be
burned to provide both heat - used in the mill - and electricity, typically sold to the
consumer electricity grid. It may also, because of its high cellulose content, be used as
raw material for paper, cardboard, and eating utensils branded as "environmentally
friendly" as it is made from a by-product of sugar production.

Sugarcane was originally from tropical South Asia and Southeast Asia. Different
species likely originated in different locations originating in India and from New
Guinea. The thick stalk stores energy as sucrose in the sap. From this juice, sugar is
extracted by evaporating the water. Crystallized sugar was reported 5000 years ago in
India.

Around the eighth century A.D., Arabs introduced sugar to the Mediterranean,
Mesopotamia, Egypt, North Africa, and Spain. By the tenth century, sources state, there
was no village in Mesopotamia that didn't grow sugar cane. It was among the early
crops brought to the Americas by Spaniards. Brazil is currently the biggest sugar cane
producing country.

A boiling house was used in the 17th through 19th centuries to make sugarcane juice
into raw sugar. These houses were add-ons to the sugar plantations in the western
colonies. This process was often conducted by the African slaves, under very poor
conditions. The boiling house was made of cut stone. The furnaces were rectangular
boxes of brick or stone with openings near to one side, and at the bottom to stoke the
fire and pull out the ashes. At the top of each furnace were up to seven copper kettles or
boilers, each one smaller than the previous one and hotter. The cane juice was placed in
the first copper kettle which was the largest. The juice was then heated and a little lime
added to remove impurities. The juice was then skimmed then channeled to the other
copper kettles. The last kettle, which was called the 'teache' was where the cane juice
became syrup. It was then put into cooling troughs where the sugar crystals hardened
around a sticky core of molasses. The raw sugar was then shoveled from the cooling
trough into hogsheads (wooden barrels) where they were put in the curing house.

Sugarcane was, and still is, extensively grown in the Caribbean, where it was first
brought by Christopher Columbus during his second voyage to The Americas, initially
to the island of Hispaniola (modern day Haiti and the Dominican Republic) . In
colonial times, sugar was a major product of the triangular trade of New World raw
materials, European manufactures, and African slaves. France found its sugarcane
islands so valuable it effectively traded its portion of Canada, famously dubbed "a few
acres of snow," to Britain for their return of Guadeloupe, Martinique and St. Lucia at
the end of the Seven Years' War.
The Dutch similarly kept Suriname, a sugar colony in South America, instead of
seeking the return of the New Netherlands (New Amsterdam). Cuban sugarcane

produced sugar that received price supports from and a guaranteed market in the USSR;
the dissolution of that country forced the closure of most of Cuba's sugar industry.
Sugarcane remains an important part of the economy of Belize, Barbados, Haiti along
with the Dominican Republic, Guadeloupe, Jamaica, and other islands. The sugarcane
industry is a major export for the Caribbean, but it is expected to collapse with the
removal of European preferences by 2009.

Sugarcane production grown between lattitude 30º North and 30º South has greatly
influenced many tropical Pacific islands, including Okinawa and most particularly
Hawaii and Fiji. In these islands, sugar cane came to dominate the economic and
political landscape after the arrival of powerful European and American agricultural
business, which promoted immigration from various Asian countries for workers to
tend and harvest the crop. Sugar-industry policies eventually established the ethnic
makeup of the island populations that now exist, profoundly affecting modern politics
and society in the islands.

In the modern times sugar is produced predominately from the sugarcane in the
following countries.

Argentina Mauritius Australia

Mexico Bangladesh Mozambique
Belize Nicaragua Brazil
Nigeria China * Pakistan
China (Taiwan
Panama Colombia
Prov.)
Papua New Dominican
Peru
Guinea Republic
Ecuador Philippines Egypt *
Senegal El Salvador South Africa
Ethiopia Sudan Fiji
Swaziland Guatemala Tanzania
Guyana Thailand Honduras
Trinidad &
India Uganda
Tobago
Indonesia Uruguay Jamaica
Zambia Lao PDR Zimbabwe
Kenya Malaysia  
* Countries also growing beet for Sugar.

Source:- International Sugar Organization Oct 2009,

Brazil is a major grower of sugarcane, which is used to produce sugar and provide the
ethanol used in making gasoline-ethanol blends (gasohol) for transportation fuel. In
India, sugarcane is sold as jaggery and also refined into sugar, primarily for
consumption in tea and sweets, and for the production of alcoholic beverages.
 
Sugarcane Production in Pakistan
Sugarcane is grown in
Pakistan from the time
immemorial attributed to
the mighty river Indus
and its tributaries. The
region, known as Indus
valley civilization
historically had the
knowledge of sugarcane
production and the
extraction of brown
sugar cakes, even now
locally known as Gur
being produced traded
and liked by the people. Traditionally sugarcane juice and pealed cut in mall pieces for
chewing used round the year.

The areas falling between latitude 24º and 34ºN, which can be classified as irrigated
sub-tropical zones with moderate temperature are suitable for the cultivation of the
sugarcane. The region can be termed as frost free zone except for the area lying above
30º N which is occasionally hit by frosts.

Sugarcane occupies nearly 1.0 million hectares of the cultivated land out of the
available 22.0 million hectares i.e. about 4.5% of the irrigated land. The crop needs
about 10 MAF (million acre-feet) of water from the total availability of about 135 MAF
in the present system and reservoirs. Known as high delta crop it has always been
susceptible to the weather cycle, restricting its expansion outside this ecological zone.

Sugar industry in Pakistan now well developed is operating at around 70% of its
capacity. The annual cane production fluctuates between 45 million and 65 million
tonnes depending on irrigation water supplies and rains, whereas the present industrial
capacity can mill at least 70 million tonnes. Good and bad crop years have meant that
the growers revenues have been unstable and uncertain against the specter of ever
increasing input cost. Research and development on the sugarcane crop has not been to
the desired mark and no noticeable variety improvement has been fielded in the past
years. This is one of the main factors affecting the survival of the sugar industry. The
variety development in Pakistan does not match the expansion in the sugar industry and
neither the industry has any systematic programme for variety propagation.

Over the past six decades

productivity increase has
been marginal (see
Figure below).

This current low yield of

48 t/ha clearly exposes
cane production as the
weak link in the overall
value chain.
Combination of cane
price, rising input costs
and lack of actionable
research products from
the local and national
research institutes
explain why there has
not been significant growth in productivity, and also the challenges facing the industry.
The growers need to have sufficient incentive in terms of the price they receive for their
cane so that they will optimize the use of inputs to produce quality cane and high
yields. The role of the government here is of paramount importance.

A brief on cane varieties in use in Pakistan is presented here render for readers short
introduction.

For details see “Sugarcane Varieties Situation in Pakistan” contributed by Karim

Bakhsh Malik a renowned sugar technologist.
 
Punjab
Amongst the three cane growing provinces of Pakistan, Punjab is leading in cane
variety evolution programme. Sugar cane Research Institute, Faisalabad has released a
number of varieties since its inception. Shakarganj Research Institute, Jhang has also an
active variety selection programme and has evolved one variety as SPSG26.

Cane varieties in cultivation are:

CPF 242, HSF 240, SPF 234, CPF 213, CPF 237, CoJ 84, Co1148, SPF 238, CP77-
400, CP43-33.

The varieties Co 1148, CoJ 84, and SPF 238 are late maturing low sugar varieties, SPF
338 gained popularity and spread at fast rate. In some of the sugar mills this variety
brought down recovery level to around 7-8 percent. Industry is trying to get rid of this
variety, but in cane slump years sugar mills do not stick to their policies and allow
procurement.

SPF 234 has been a major variety of Southern Punjab and covered area to 90-95%
raising sugar mills recovery to over 10.5%. During 2008-09, the variety got severely
infected by rust. Now the industry is left with only 4 or 5 varieties which too have
selective adaptability in different soils and climatic conditions.
 
Sindh
The variety evolution programme in Sindh is not encouraging. Provincial Research
Institute, Tandojam released its last variety (BF 129), during 1996. Nuclear Institute of
Agriculture, Tandojam, has released two cultivars, NIA 1998 and NIA 2004. One
variety Thatta 10 is developed by a PARC Sugar Crops Research Institute, Thatta. The
Sindh Sugar Industry is some how trying to meet its requirements by unscientific and
irregular introduction of varieties from Punjab (SPSG 26, SPF 234, CPF 237, HSF
240). Habib Sugar Mills making its own efforts to test varieties for its tract. The cane
varieties under cultivation are:

Th 10, BL 4, Triton, L116, BF 129, NIA 98, NIA 2004, SPSG 26, Larkana 2001, SPF
234, CPF 237, HS 12, Co 1148, CP 67-412, Disco.

Research Institutes in Sindh does not have a strong base of germplasm selection. In
lower Sindh main varieties under cultivation are BL 4, BF 129, Triton, Thatta 10, SPF
234; CPF 237 is a new introduction. The Larkana-2001 a late maturity variety is
confined in Larkana tract. In upper Sindh, Thatta 10, CPF 67-412, L 116, HS 2, HS 12,
Co 1148, Disco and SPF 234 are popular. HSF 240 and CPF 237 are new introductions.

SPF 234 got infected by rust. Disco has been a notorious variety depressing sugar
recovery. Industry is trying to replace it with other varieties.

Besides a famous area for cane flowering, Provincial Research Station is silent on cane
breeding work. PARC Research Station, Thatta works on open pollinated fuzz; required
infrastructure for cane breeding has not been developed.
 
NWFP
In NWFP as well, variety development programme is slow and the province has quite a
few varieties to grow. Sugar industry has good quality as well as poor quality cane.
Cottage Industry of Gur is a big challenge to the sugar industry. Generally it happens
that the quality varieties are crushed for Gur and poor quality cane is supplied to sugar
mills. Due to low cane supplies and low sugar varieties, the industry is in crisis of
producing costliest sugar.

· Amongst the cane varieties released CP 77-400 is now most popular variety covering
about 75% cane area of the province; Mardan 93 is also grown on large area under CP
51-21 and CP 65-357 is being reduced. In D.I.Khan region Co 1148 has been the major
variety under cultivation. The variety SPF 238 also spread like hot cake and efforts are
being made to replace it with HSF 240 and SPF 242. Quantitative and qualitative.

There is need for further research and multiplication of the suitable varieties to suit
different soils in the different parts of the country.
 
Factors contributing to low yields
Inadequate water supply
 Inadequate water supply is the key factor in the loss of yield per hectare. With
the limitation in water supply there is a compelling need to explore the
exploitation of drip and or sprinkle irrigation systems. While such practice
would need heavy investment it would also address issue of scarcity of water
and competing requirement for the expanding population. Introduction of
cultivars resistant or tolerant to water stress is a research challenge requiring
special attention. Lining of thousands miles of watercourses, already in hand is
a positive step towards reducing loses.

 
High cost of inputs
· Cost of inputs is getting higher everyday. These includes fertilizers , pesticides and
seed. Growers income, however, fluctuates depending on the harvest. On the other hand
continuous depressed sugar prices in the domestic market does not allow the millers to
offer a just price for sugarcane to support increased production and productivity.
 
Cane payment system
· At present in Pakistan, sugarcane is the only crop that gets paid by weight and not by
quality. The loss is generally borne by the mills. A significant improvement in the
supply of quality cane is expected as soon as a payment mechanism is determined
which takes into account cane quality, in particular, sugar content.

Efforts are now underway led by the Pakistan Sugar Mills Association to persuade the
Government to consider adopting the cane payment system used in Australia or other
parts of the world, which is based on cane quality and which is fair to both growers and
millers.
 
Development zones
· Creation of the Sugarcane Development Zones was another idea proposed by the
Pakistan Sugar Mills Association and has been persuaded for the last few years. At
 present the sugarcane growers are free to sell their produce to any mill at any distance
for a better price. The freedom of such sale and negotiation may bring short term
benefits at the expense of potential technical and financial support extended to growers
by the local mill in the production of his crop. The help thus extended to growers who
agree to supply their cane to the mill in their locality includes financing seed, new
varieties, fertilizer, pesticides, machinery and expertise services.

While this initiative of encouraging growers to supply to cane to the mills in their
locality is a progressive step, the lack of trust created between the growers and the
millers is a hurdle in the way of much needed development on the technical grounds.

Marketing of sugarcane was regulated until 1987 through Sugar Factories Control Act.
Each sugar mill was assigned a specific area known as zones to procure sugarcane at
the price declared by the Government. Only a small quantity of sugarcane could be
diverted to the manufacture of gur.

With the official system abolished in 1987-88 farmers were free to supply cane to any
mill. This brought with it added disadvantages, namely:

· The role of the middleman took birth, who purchased cane from growers before
harvest at a price lower to what he eventually sold to a mill. While the role of the
middleman is frowned upon by the millers, growers and the Government, without a
suitable alternative this practice persists.
· One of the major consequences of this has been that sugarcane is transported to long
distances to mills, not necessarily within the growers locality, resulting in unnecessary
strain on the road network, additional costs for fuel and adverse impact on the
environment.

OVER EXPANSION IN THE SUGAR INDUSTRY

55% capacity utilization has left the industry uncompetitive and has inflIcted heavy losses on the mills

By SHABBIR H. KAZMI
Dec 14-20, 1996

The sugar industry in Pakistan has continued to expand heavily in spite of negative fundamentals and
continuous advice of Pakistan Sugar Mills Association to the contrary for the last six years. New units
have been established and the number increased from 52 mills in 1991-92 to 74 in the current season
which has commenced last month. Besides, the mills already in operation have enhanced their sugarcane
crushing and sugar refining capacities through BMR. The increase in the number of sugar mills, in such
an unplanned manner, has been blamed by many on the government and the financial institutions who
have provided long-term loans and wasted limited resources.

The year 1995-96 was in sharp contrast with the previous years during which sugar production was close
to 3 million tonnes which dropped by a hefty 20% to 2.449 million tonnes from 2.983 million tonnes in
1994-95. That, necessited import of around 500,000 tonnes involving substantial foreign exchange outlay.
The domestic consumption is estimated at around 2.7 million tonnes.

The magnitude of problems of the sugar industry can be gauged from the crushing capacity utilization
dropping to around 55% during 1995-96. With idle capacity at 45%, rarely could an industry break even,
let alone expect a profitable run.

The political angle

Initially the sugar mills in the country were established by the business community but during the last 8 to
10 years establishment of sugar mills has become a prerogative of people indulging in politics directly or
indirectly. They were not only able to get the permissions to establish sugar mills but to acquire huge
credits from the financial institutions as well. The cost of projects established after the mid-eighties was
not only very high but credits were disbursed at 80:20 resulting in very high financial cost.

All these new mills have been established in prime sugarcane growing areas where the operating mills
had spent resources to educate farmers in ahieving better yields and had arranged soft-term credits for
the farmers for the procurement of seed, fertilizer and agricultural implements. With the establishment of
mills by people enjoying political clout and power, the growers were forced to sell their produce to these
mills. During the last season, industry sources said, one of the politicians ownng sugar mills was
instrumental in closure of a sugar mill as it was paying higher prices to the growers.

Crushing capacity

Expansion of daily crushing capacity and reduction in availability of sugarcane has, over the years been
responsible for persistent crisis in the industry which has been deepening with each successive year.
There has been a constant reduction in actual sugarcane crushing.

During 1995-95 sugarcane crushing on countrywide basis dropped by 17.7% and sugar production
decreased by 17.9% as compared to the preceding year. Sugarcane crushing in the Punjab came down
by 19.6%. The sucrose percentage also dropped from 8.49% to 8.12% resulting in cumulative decline in
sugar production by 22.3% as compared to last year.

In Sindh, sugarcane crushing fell down from 12.038 million tonnes in the preceding year to 10.341 million
tonnes. The production of sugar declined from 1.108 million tonnes in 1994-95 to 1.008 million tonnes in
the year under review. However, there was an improvement in recovery which improved from 9.2% to
9.75%.

The mills in NWFP suffered serious setback and production of sugar in the province fell down to 65,682
tonnes only as against the preceding year's production of 104,136 tonnes - a massive reduction by 63%.

Cost of production

The shortfall in sugarcane availability resulting in under-utilization of capacity, coupled with regular
enhancement in its support price fixed by the government, have been factors responsible for the increase
in cost of production of sugar.

Since the nature of production is seasonal and consumption continues throughout the year, the financial
cost incurred on carrying for over six months squeezes profit margins or increases accumulated losses of
the mills.
Not only the government has been increasing sugarcane support price, the growers have also started
demanding prices higher than those fixed by the government. Knowing the limited availability of
sugarcane, the growers either completely stop the supplies or curtail them to a large extent.

Succumbing to pressure from the growers, the mills are forced to pay price for sugarcane much higher
than those fixed by the government. The situation further aggravates the mills' position as they are not in
a position to recover even the season's variable cost which affects repayment of loan installments and
interest charges to the financial institutions.

Factors affecting sugarcane supply

Over the years many factors have been responsible for shortfall in sugarcane supply. They include
increased consumption by the mills and failure of the growers to increase sugarcane production.
Production could be increased either by increasing the area under sugarcane cultivation or more
importantly by improving the yield per acre substantially.

A comparative analysis of sugarcane yield and recovery between India and Pakistan prepared by the
Pakistan Sugar Mills Association indicates that Pakistan is far behind India. While in Pakistani Punjab
farmers are able to get a yield of only 43 tonnes per acre, in the Indian Punjabthe yield is over 63 tonnes
per acre. The average recovery is 9.39% in Indian Punjab as compared to an average recovery of 8.44%
attained in the Pakistani Punjab.

Similarly, the average yield and recovery in Indian Gujrat is 89.6 tonnes per acre and 11.34% respectively
ascompared to 57.3 tonnes per acre and 9% recovery in Sindh.

In both the provinces, Sindh and Punjab, the sugarcane cultivation directly competes with cotton. If the
prices of cotton are better, the farmers switch over to it, or vice versa. When the CLV attacks on cotton
were common, a large number of farmers, originally growing cotton, switched over to sugarcane
cultivation. But with the improvement in cotton prices and availability of virus resistant varieties, the
farmers have gone back to cotton cultivation.

The area as well as production of sugarcane shrank by 5 and 4 percent respectively in 1995-96 as
compared to last year.

In the past, the provincial governments used to ban production of 'gur ' during sugarcane crushing season
but lately its production has increased manifold. The percentage of sugarcane consumed by the sugar
mills in Sindh is still the highest as compared to the other two provinces. 'gur' making has progressed
without paying any taxes and has therefore been consuming more sugarcane to the detriment of the
sugar industry.

The average utilization of sugarcane on countrywide basis touched the highest - 76.93% in 1993-94 but
has gone down during the last two years.

In the Punjab the maximum utilisation was 81.87% in the same year but came down to 63.22% during
1995-96. But the consumption of sugarcane by mills is NWFP was reduced to only 17% in 1995-96.
Contrary to this, Sindh has the highest sugarcane consumption record. The maximum consumption
touched 93.85% in 1992-93 and came down to 75.28% in 1995-96.

Myth behind massive expansion

Over the last few years most of the existing mills have enhanced their crushing capacities 2- to 3-fold.
They give two reasons for this: expansion is much cheaper as compared to establishing new mills of
equivalent size and they also want to achieve better recovery by curtailing the number of crushing days.
The recovery at the beginning and at the tail-end of the season is low. Therefore it was considered to
restrict the crushing period to about 150 days to achieve a better rate of recovery and reduce the variable
cost of the season.

Incidentally, the hypothesis got some proof last year. Delay in commencement of crushing in Sindh has
been instrumental in achieving a higher recovery rate. Mills in Sindh are thinking about beginning the
crushing in November rather than in October.

Liquidity crunch

The commercial banks were directed by the State Bank of Pakistan to adjust by August 20, 1996, the
balances of credit made available to the sugar industry against sugar stocks. The action was based on
information that the mills were hoarding the stocks. Industry sources, however say that they prepare
fortnightly reports pertaining to sugar production, its lifting and stocks. Besides, the mills would never like
to hoard the stocks and their priority was to empty their godowns as quickly as possible as carrying a
huge inventory meant huge financial cost.

Existing problems

Sugar mills in Sindh pay quality premium regularly - while the mills located in the other two province do
not pay such premium - and paid Rs. 733 million to the farmers in 1995-96 alone resulting in additional
cost of production.

Oblivious of the difficult situation faced by the sugar industry, federal, provincial and local levels,
persistently keep hanking for more revenue. Some of the revenue measures imposed in Sindh lately are,
imposition of market committee fee, road cess, surcharge on sugarcane cess, varying rates of octroi,
export tax and rawangi mahsool.

Although the Sindh High Court declared collection of rawangi mahsool unconstitutional, bad in law and
without authority, and the Supreme Court also dismissed the appeal, yet the district councils recover this
tax by a novel procedure.

New deterrents

The central excise division of the Central Board of Revenue vide SRO 329(I)96 dated May 30, 1996
curtailed the period of sugar storage, without payment of duty, to six months from the date of production.
However, the collectorate has been given discretion to extend the period.

The custom & central excise division of the CBR during June 1996 directed the sugar industry to manage
clearance of sugar on the basis of 'first-in-first-out'. According to the Association sources, stacking of
sugar bags and clearance strictly on the prescribed lines is not manageable and practical. The
instructions seem to have been issued by error of judgment and common sense. It looks as if the person
who has issued the directive has never visited a sugar mill and does not understand its operation.

Structure of sugar industry in the country

While sugar production is primarily confined to two provinces, Sindh and Punjab, and a small quantity in
the NWFP, the product is consumed in all the four provinces and Azad Jammun and Kashmir. Every year
a substantial quantity is smuggled to Iran and Afghanistan and even goes as far as the newly- liberated
Central Asian states.

Traditionally, Sindh has always had surplus production and fed Balochistan, lower Punjab and at times
supplies were made to the NWFP, upper Punjab and Azad Kashmir. However, over the years Punjab has
attained self-sufficiency. Since the price of sugar is more or less uniform throughout the country, higher
cost of freight incurred on dispatches to far-flung areas squeezes the profit margins of mills located in
Sindh.

Imported sugar also enters Pakistan via Karachi, Sindh and since most of the quantity is sold in the
wholesale markets in Karachi, the prices remain subdued in the province.

Although a number of new mills with large capacities have been established in the Punjab the fact
remains that cultivation of sugarcane and production of sugar in the province involves higher costs. The
yield per acre and recovery are also low. It is mainly because the climatic conditions are not conducive for
cultivation of sugarcane in the province. The climate in Punjab is dry and the average temperature is high
which reduces the moisture content in the standing crop.

Sugarcane needs high temperature and humid atmosphere. The conditions prevailing in the lower Sindh
are most conducive and therefore the yield per acre and average sugar recovery percentage is the
highest in the province.

The industry experts and agriculturists are strongly of the view that shift of sugar production from Sindh to
Punjab is one of the major reasons for increase in its cost of production in the country.

Key players

The sugar mills in Punjab which produced over 60,000 tonnes of sugar in 1995-96 included the names of
Brothers, waqas, Shakarganj, Tandlianwal and Shahtaj. Waqas crushed the highest quaintly of sugarcane
and also produced the highest quantity of sugar.

In Sindh, Dewan crushed the highest quantity of sugarcane and also produced the largest quantity of
sugar exceeding 100,000 tonnes. The other mills which produced over 50,000 tonnes were Bawany,
Faran, Habib, Shahmurad and Sindh Aabadgar.

Dewan Sugar Mills started sugarcane crushing on October 18 and ended April 14 during the last season.
By crushing 983,489 tonnes sugarcane during the period with an average recovery of 10.15% it produced
100,008 tonnes of sugar. In the half-yearly report the directors' review expressed on the increase of
sugarcane prices which touched new heights as most of the mills entered into an open warfare for
procurement of sugarcane. Dewan has been declaring modest cash dividend in the past in spite of
persistent increase in the procurement prices of sugarcane. The mills located in prime sugarcane growing
area of Sindh was established in 1987.

Habib Sugar Mills established in Nawabshah in 1963 has not only tripled its crushing capacity using in-
house expertise but is among the few sugar mills which have been declaring handsome dividends in the
past. During 143 days of crushing during 1995-96 season it produced over 60,000 tonnes of sugar with an
average recovery of 9.2%. It also produces industrial alcohol. The modifications in the distillery has
helped to streamline its operating efficiency.

Shahtaj Sugar Mills worked for 157 days during the last season and achieved the highest level of
crushing and sugar production since the unit was established. According to directors' report the company
could have crushed larger quantity had there been no shortage of sugarcane. The unit is located in
Punjab and also suffered from shortage of sugarcane and increase in sugarcane support price.

Mirpurkhas Sugar Mills also suffered from the shortage of sugarcane and the number of days it worked
was reduced to 157 as against 178 days during the last season. The company exported 14,600 tonnes of
sugar from last year production and earned over half a million dollars.
Noon Sugar Mills produced lesser quantity of sugar mainly due to limited availability of sugarcane and
disruption of supplies for two weeks. The company supplied 59,000 bags of 50 kg each to the government
for sale through utility stores during the last season.

Import of sugar

Import of sugar is a short-term measure to ensure availability and stabilize its price in the domestic
market. However, the recent experiment proved a futile effort. In spite of import of sugar, the government
failed in arresting the upward trend of sugar prices.

The industry experts have a valid point that increase in support price and quality premium have failed in
increasing yield per acre and recovery percentage but the cost of sugarcane per tonne has been
increasing over the years pushing up the cost of production of sugar. Therefore, the farmers should
improve yield per acre or the industry would not be able to sustain further losses.

Measures to improve profitability

Since the industry has expanded its capacity to the present level - producing nearly 5.5 million tonnes of
sugar per annum - the first suggested step is to ban the establishment of new units and expansion of the
existing units till such time as almost all the mills achieve 90% capacity utilization.

Since it is not possible to increase area under sugarcane cultivation the suggested second step is to
undertake efforts to develop new varieties offering higher yield and recovery. This will result in higher
sugarcane production and better returns to the growers without increasing support prices, improved
capacity utilization by the mills, larger sugar production, reduction in cost of production per kilogram of
sugar, more revenue for the government, stable prices for the consumers and better dividend to the
shareholders of public limited companies.

Since the country is capable of producing double the quantity consumed domestically export of surplus
sugar can also help in earning the much needed foreign exchange for the country.

During the 1995-96 season the mills started late with the delay ranging from 30 to 45 days. About 66
sugar mills crushed over 28 million tonnes of sugarcane and produced about 2.45 million tonnes of sugar
with an average recovery of 8.7%. In Punjab 37 mills produced 1.375 million tonnes of sugar by crushing
nearly 17 million tonnes of sugarcane and achieved average recovery of 8.10%. In Sindh the average
recovery, touching 9.75% helped the 24 mills which operated during the season to produce over one
million tonnes of sugar by crushing 10.34 million tonnes of sugarcane. In NWFP, the 5 mills which worked
during the season produced only 65,682 tonnes of sugar crushing 817,429 tonnes of sugarcane with
average recovery of 8.19%.

According to the information available, during the current season out of 31 mills in Sindh only 27 were
able to commence operation. The season started in November. The 27 mills in operation produced only
84,446 tonnes of sugar achieving average recovery of 7.6%. Out of the total quantity produced only
28,167 tonnes of sugar was lifted and the remaining 56,279 tonnes were lying at the mills.

Sugar Production

(Million tonnes)
1990-91 1991-92 1992-93 1993-94 1994-95 1995-96
Sindh 0.902 1.187 1.175 1.172 1.107 1.008
Punjab 0.933 1.012 1.103 1.634 1.771 1.375
NWFP 0.072 0.097 0.096 0.093 0.104 0.065
Source: Pakistan Sugar Mills Association

Sugar recovery

(Average %)

1990-91 1991-92 1992-93 1993-94 1994-95 1995-96

Pakistan 8.44 9.25 8.71 8.49 8.72 8.70
Sindh 9.40 9.93 9.24 9.00 9.20 9.75
Punjab 7.72 8.62 8.22 8.14 8.44 8.10
NWFP 7.99 8.85 8.64 8.66 8.83 8.19

Source: Pakistan Sugar Mills Association

Performance of the listed companies

Although more than 40 companies are listed under 'sugar and allied' sector at the Karachi Stock
Exchange with a total paid-up capital of over 4.7 billion rupees; barring only a few, all are sugar mills.
Shares of most of the companies are quoted below par and only a few were able to declare cash
dividend. The list of companies declaring regular dividend comprise Dewan, Mirpurkhas, Noon, Shahtaj
and Thal industries.

According to research analysts working for securities analysis companies, the negative fundamentals for
the industry prevailing for nearly five years had kept the investors away from this second largest agro-
based industry. Individual, institutional, local, mutual funds and foreign fund managers have neither
shown interest nor are interested in investing in scrips of sugar mills in general. In the past, though this
industry has been distributing handsome dividends.

http://www.pakistaneconomist.com/database2/cover/c96-104.asp