Quo vadis Sugar?

  • 4th November 2020
  • 2020
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The current controversy surrounding the final cane payment for the 2019 season   vis a vis the government promised guaranteed price of $85 per tonne, will further erode growers’ confidence in the sugar industry: Mahendra Chaudhry

In a statement issued on Wednesday which was carried in the Fiji Times of  29 October, I claimed that growers had been short-changed by $2.79 per tonne in their final cane price and called on government to honour its promise to pay them $85 per tonne.

In his response, Economy Minister Aiyaz Sayed-Khaiyum says there is no shortfall as “there are various master award deductions and all these are deducted from the gross payment”.

With due respect, the Minister’s statement is irrelevant to the issue. Let me explain.

On 28 October 2020 the Sugar Industry Tribunal announced the final cane payment for the 2019 season. He certified $97,566,444 as the net share of the cane proceeds for growers for the 2019 season.

This works out at $54.01 per tonne of cane. The Fiji Sugar Corporation had to that date paid out $52.92 per tonne.  The balance payable to the growers in the final cane payment, as per the Master Award, was $1.09, the Tribunal said.

Under government’s promise to give growers a guaranteed cane price of $85 per tonne, a top up of $30.99 was needed.

The following amounts were received in hand by the growers for their 2019 crop:

  • Delivery Payment – $37.90
  • 2nd Payment –  $12.63
  • 3rd Payment – $11.00
  • 4th Payment –  $13.06
  • Final Payment     –  $7.62
  • Total – $82.21

They are now owed $2.79 to bring the total to $85 as guaranteed by government.

The deductions under the Master Award are a red herring and have no relevance to the issue. The promise was for $85  – and $85 they must be paid.

I call on the PM and Sugar Minister, and the Minister for Economy not to short change the growers.

As it is, government has been strangely silent on whether it intends to extend the guaranteed price for cane beyond this year, despite repeated queries from growers and their representatives.

Without a guaranteed price, cane farming will not be a lucrative livelihood for many of the growers. They would be paid around $55 per tonne based on the proceeds currently received from sugar sales. This in itself will make it unprofitable to continue growing cane.

Although the standing of sugar as a revenue earner may have dropped to the third or fourth place, its socio-economic impact remains quite significant.

Close to 200,000 people are directly or indirectly dependent on the industry for their livelihood. The farming community in districts like Ba, Macuata and Ra remain heavily reliant on cane for their economic well-being.  To some extent, so are the rural communities in the Lautoka, Nadi and Sigatoka areas.

With the aviation and tourism industry brought to its knees by the devastating impact of COVID-19, the FF government can no longer afford to keep its eggs in just one basket. It needs to diversify, and sugar, agriculture and other primary produce, remain its best options.

The importance of sugar to the health of the national economy is now crucial yet the industry has been reduced to a shocking state under the stewardship of this government. For the past 10-11 years, the Sugar Ministry has failed to achieve set targets under its various strategic plans.

The target set in 2012 to produce 4 million tonnes of cane by 2020 has remained a pipe dream. It was later reduced to 3 million tonnes but they are still struggling to produce even 2 million tonnes.

Today the industry is less than half of what it was when Bainimarama took over government in 2006.

Government assistance to cane farmers has been progressively reduced in recent years – these include the grants for cane planting, assistance to new farmers and the maintenance of cane access roads, weedicide subsidy and cane cartage from the Penang to the Rarawai Mill.

The state of all the mills is shocking. The TCTS ratio for this season at around 11:4 is alarming, resulting in colossal losses to farmers and the industry as a whole.

Industry KPIs

A quick look at the industry KPIs (key performance indicators) pre and post the Bainimarama era are conclusive enough and should be taken seriously by all stakeholders  –  the figures are taken from FSC annual reports 2007 and 2019.

Year Cane (tonnes) Sugar (tonnes) TCTS Active Growers Area Harvested FSC profit/(loss)
 

2006

 

3.23m

 

310,000

 

10.0

 

15,370

 

55,438 ha

 

$7m

 

2019

 

1.70m

 

160,000

 

10.6

 

11.902

 

37,105ha

 

($80m)

Source: FSC Annual Reports 2007 and 2019

  • In 2007, FSC had a loans portfolio of $50m against which it had Reserves and Retained Earnings totalling $154m.
  • By 2019, the loans portfolio had escalated to $412m, the Reserves had been wiped out and replaced by accumulated losses of $344m.
  • The average crushing rate of the mills in 2007 was 919 tonnes per hour.
  • In 2019 it had declined to 674 tonnes per hour.
  • Again in 2007, the mills were crushing for 76% of the available time. This had dropped to 63% in 2019, despite millions spent on refurbishing and upgrading.
  • Both FSC and cane growers are now heavily reliant on government loans, grants and subsidies for their survival.

By any standards, PM Bainimarama must take full responsibility for the calamitous state of the industry today.

Misguided polices

Right from the beginning there was government interference with industry institutions which removed the consultative process and the checks and balances introduced under the Sugar Industry Act of 1985.  As a result, the growers today have no say even though they have a 70% stake in the industry.

The Sugar Ministry and the Fiji Sugar Corporation are in complete control while growers have been marginalized.

The industry might have fared much better had the Bainimarama government not:

  • hijacked growers institutions and put them under complete government control – the Sugar Cane Growers Council and the Cane Growers Fund.
  • dismantled the Sugar Commission of Fiji and the Mill Area Committees – institutions in which cane growers had a voice.
  • ordered the Fiji Sugar Corporation to cease deductions of membership dues of cane farmers unions in a move designed to decimate the unions.
  • closed the Penang Mill in 2016 after Cyclone Winston. The mill could have been fixed for as little as $3m, according to industry sources at the time.

What lies ahead?

The question today is how long can the State and the taxpayers continue to pump scarce funds into an industry that is persistently failing to perform to expectations?

At this rate, a collapse is imminent because government finances are in no shape to continue subsidizing it for much longer.

BUT the industry must be saved for the greater good of the nation.

To revive the industry we must consider a completely new approach and new set of dynamics.

We must bring back the partnership approach that existed in the past. The growers, the landowners and the mill workers must be given their rightful place in the affairs of the industry.

That should be the beginning of the revival process. The industry can only be saved through a collective effort.

The government must convene, at the earliest, an all industry conference of stakeholders and their genuine representatives –  not government agents – to work out a solution to save the livelihood of some 200,000 people dependent on it.

The task will be enormous, requiring sincere commitment and goodwill on the part of the parties to save an industry which has for the last 150 years played a prominent role in the economic and social well being of the nation and her people.