State-owned mills' sugar production cost skyrockets despite failing to meet demand
The state-owned sugar mills have been producing each kilogram of sugar for as much as Tk324 although the product’s market price is only Tk60.
Sugar produced by the heavily subsidised mills fails to meet the local demand mainly due to a scarcity of sugarcane, forcing the government to procure the rest from the private sector.
The sector’s accumulated loss stood at Tk3,510 crore, according to the 2014-15 annual report of Bangladesh Sugar and Food Industries Corporation (BSFIC).
During the same period, government-owned mills produced 77,450 tons of sugar against a demand of 1.4 million tons – based on the World Health Organisation recommended calculation of per capita sugar demand of 9Kg annually.
There are 15 mills under BSFIC with a production capacity of only 210,440 tons.
Carew and Co (Bangladesh) Limited is the only state-owned mill to make some profit. But it too produces every kilogram of sugar for Tk186.
Carew’s sugar unit has incurred a loss of Tk43 crore while the distillery units made a profit of Tk58 crore in the last fiscal.
Scarcity of raw material
BSFIC Chairman AKM Delwer Hussain claimed that most of the mills under them had the capacity to produce the targeted amount of sugar.
“But we have been failing to do so due to the lack of raw material, that is sugarcane,” he told the Dhaka Tribune.
He pointed out that Carew had run for only 76 days in the current season as there was not enough sugarcane in the market.
About the high production cost, Carew’s Managing Director Arshad Ali said that the sugar mills normally went into production during winter when farmers harvested sugarcane.
“So, it was ideal to run the mill for six months but now we cannot run the mill for a long time due to scant sugarcane supply,” he added.
Arshad said various chemicals were also needed to produce sugar which ultimately increased the production cost.
“Sugar production cost goes up when the operational cost of a mill sitting idle is added with it,” he added.
Dwindling sugarcane production
Bangladesh’s sugarcane production has taken a nosedive in recent years.
The Department of Agricultural Extension (DAE) said around 5.5 million tons sugarcane was produced in 2015-16 fiscal year on 281,000 acres – about half the figure from two decades ago.
DAE data shows that this year sugarcane has been cultivated in around 150,000 acres of land, indicating a low output this year.
Mizanur Rahman Khan, deputy director (sugarcane) of DAE, said, “Farmers have been giving up on sugarcane due to its low market price compared to other cash crops.”
Keeping a piece of land occupied for almost a year for sugarcane is difficult for farmers as they can produce at least three crops during that period, he added.
Jhenaidah farmer Abdul Baten stopped sugarcane cultivation two years ago.
“I can grow as much as 19 tons of sugarcane per acre at a cost of Tk20,000. But it will fetch Tk59,280 if each ton is sold at Tk3,120,” he told the Dhaka Tribune.
Farmers, on the other hand, can produce three crops – potato, paddy and vegetable or potato, maze and paddy – in a piece of land a year which brings twice the profit.
Out of 15 state-owned sugar mills, only five have their own farming land. They are Thakurgaon sugar mill, Setabganj sugar mill, Mohimaganj sugar mill, Gaibandha sugar mill and Carew.
For unknown reasons, half of the land remains barren.
Md Abdul Quddus, general manager of Mobarakganj Sugar Mills, said leaving arable land barren was one of the inefficiencies.
“If the state-owned sugar mills can make use of their own land to produce sugarcane, the amount of loss may come down,” he told the Dhaka Tribune.