Flawed policy at play for sorry state of sugar industries

Published at 12:00am on January 25, 2021

THE Bangladesh Sugar and Food Industries Corporation in December 2020 announced that it would close six sugar mills, sparking off outrage among the workers, on grounds that they were making losses. The corporation counted Tk 3,976 in losses in five years; the losses in the 2020 financial year stood at Tk 970 crore. In addition, the corporation has the liability of Tk 7,895 crore in bank loans and owes workers and cane growers about Tk 521.76 crore in arrears. Despite a high domestic demand for sugar, at least 38,000 tonnes have remained unsold. The state-owned sugar mills have, thus, become an economic burden, but they are so because of flawed policies, coupled with inefficiency and corruption in management, and the decision to liberalise the sector. In such a situation, while public coffer runs dry, cane growers and mill workers continue to suffer.

The state-owned sugar mills were set up in the 1960s, but there have hardly been any fresh investments in modernising the factories to improve their production capacity. The local industry has already faced a low sugar recovery rate and high labour cost. Of the 15 state-owned mills now, only three remain in operation for four months, the rests barely run for a month for lack of cane supply. An idle labour force, as corporation officials insist, is, therefore, a burden, adding to the production cost. Economists and Bangladesh Sugar Mill Sugarcane Growers’ Federation and Bangladesh Sugar Industries Workers-Employees Federation leaders disagree, saying that it is the liberalisation of the sector that has done the harm. The import of cheap sugar destabilised the local market. In 2019, international sugar price was about Tk 28 a kilogram against the domestic price of Tk 44–55. An uneven competition with imported sugar forced the corporation to rely on bank loans which, in the end, increased its liability and production cost. When a higher import tariff could have given the local industries some competitive edge, the government had allowed refineries to operate on conditions that they would import half of their output and help to keep the local price stable. However, that has not been the case.

A policy misstep in every step of the way has, therefore, turned the state-owned sugar mills a loss-making venture. However, as experts insist, there is still scope to revitalise the sector with the right policy intervention, which will create a scope for the diversification of crops in land used for cane farming, a cost-effective management structure and more importantly a well-thought-out import policy that will regulate sugar importers and prevent them from manipulating the local sugar market. At the same time, the government must involve all stakeholders to plan the entire production cycle from harvesting to crushing of the cane to address the problem of low sugar recovery rate, an inadequate supply of cane and a timely payment for growers so that they remain interested in growing sugar cane.