Fiji sugar industry not so sweet

from w
Here is a long article but worth reading if you are interested in the future of Fiji's sugar industry.  Things are not as sweet as we hoped for.
From the Fiji Times features today:

Ailing sugar industry

Bala Dass
Monday, August 03, 2015

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Kanta Prasad, 53 of Karavi Tractor Trailer Gang cuts cane in Karavi, Ba. The writer says Fiji and the canefarmers are poorer for the loss of the EU grant. Picture: JAI PRASAD

There is little doubt that the sugar industry is at the crossroads. The decisions that the stakeholders and Government will make in the next two years will have a profound impact on the ability of the industry to survive beyond September 30, 2017 following the expiry of the duty-free access of our sugar to the European Union.

Already we are struggling.

For more than 100 years the sugar industry has been the mainstay of our economy.

The industry weathered many storms and survived.

These included natural disasters like hurricanes, cyclones, droughts and even three military coups in 1987 and 2000.

But the industry is in a downward spiral, accelerated by the fourth military coup of December 5, 2006. There is no denying this sad but unmistakable fact.

The decline of the industry, is reflected by the following statistics:

Cane production in 2013 fell by 1.618 million tonnes from 2006. Sugar production fell by 130,140 tonnes. This is the unmistakable reality.

The extent to which the cane and sugar production has fallen in the past eight years is best shown by the crushing record of the country's largest sugar mill at Lautoka.

In 1979, Lautoka mill alone crushed one-million-748 thousand-120 tonnes of cane out of a total of 4.058 million tonnes of cane.

In 2012 and 2013, all four mills crushed a total 1.546 million and 1.608 million tonnes respectively. This is well below the 1.748 million crushed by Lautoka mill 36 years ago.

However in the last two years, the industry has undergone temporary resuscitation with improvement in TCTS (Tonnes of Cane needed to manufacture one tonne of sugar). This has improved to 8.09, resulting in increased extraction and manufacture of sugar from a significantly reduced tonnage. This is expected to continue in 2015 because sugar content in cane is at an optimum between late June and September because of cool and dry conditions.

And because of a significantly reduced crop size the four mills are able to crush a sizeable tonnage of this crop during the optimum period when fresh cane is harvested and before programmed burning is allowed from October.

And the total crop this year will decline by 25 per cent from the original forecast of a little more than 2 million tonnes because of lack of planting of new crop due to the drought.

This will also have a significant impact on next season's crop, unless of course Government implements a Crop Rehabilitation Scheme of the kind we witnessed after the 1998 drought.

But we are still a long way from achieving a production of more than 3 million tonnes of cane and 300,000 tonnes of sugar, the minimum required for the long-term viability of the industry.

If the TCTS ratio of 8 tonnes to one tonne to sugar is maintained from last season, then three million tonnes of sugar cane will produce 375,000 tonnes of sugar. This will be the ideal minimum benchmark.

This is also recognised by the Prime Minister and Minister for Sugar, who, while addressing the 46th session of the ISO Council in London on November 29th said: -

"The abolition of EU sugar production quotas post 30 September, 2017 and the consequent adverse implications on sugar prices pose a very big challenge indeed. Moreover, EU sugar prices have already come under pressure, with significant falls compared to prevailing prices over a year ago. So suppliers like Fiji are having to prepare for a reduction in our export revenues even before 2017 — a sobering prospect for any developing nation".

A sobering prospect indeed. The allocation of $5m dollars for cane planting for the past few years has seen little impact in the increase of cane production. Much more is needed.

In the 2015 Budget there is a little more than 36 million dollars listed under Head Number 35 as Aid in kind from the European Union for social mitigation programme. There is no explanation in the Budget Estimates or in the Supplement as to what this means and until now nobody from Government including the PM has clarified this despite it being raised in Parliament.

The deteriorating state of the sugar industry is also largely linked to the problems faced by canefarmers. And the problems of the farmers remain largely unresolved.

The SCGC was tinkered with and the legitimate authority usurped, spearheaded by the unlawful sacking of the SCGC chief executive officer soon after the coup of December 5, 2006.

Almost three years later in 2009, the SCGC was scrapped, which meant that the last remaining democratically elected institution comprising elected representatives of the cane growers was abolished.

Farmers, however still continue to pay levy to the SCGC through deduction from their proceeds to fund its operational expenditure.

And this is illegal because according to the Sugar Industry Act, the Budget of SCGC has to be approved by the full council and the Board of Directors, submitted to the Tribunal for certification and then to FSC for deduction of levy.

Therefore for the past six years farmers have been forced to pay an average of $550 000 as levy each year unlawfully.

The SCGC now is basically like a toothless tiger, unable to effectively raise the concerns of the farmers, let alone find meaningful solutions to their common problems.

Some of the basic problems faced by canefarmers are:

(i) Land tenure. Failure to renew majority of expiring land leases has been a contributing factor to declining cane production. This is a fact contrary to what Government has been saying.

As of November last year, Government claimed "6284 land leases had been renewed under Bainimarama leadership", as stated by the late permanent secretary for Ministry of Sugar Manasa Vaniqi.

He said on November 4, 2014 reforms undertaken by the Bainimarama government in the sugar industry had resulted in the renewal of 6284 sugarcane land leases.

But, official statistics from the i-Taukei Land Trust Board shows otherwise.

The statistics show that from 1997 to 2014, 8151 cane leases had expired. A further 1373 leases will expire in the next three years until 2017 bringing the total to 9524. Only 5105 or 53.6 per cent of leases will have been renewed.

Past governments and politics have been blamed for the land lease problem. But between 2007 and 2014, when there was no democracy, 2899 cane leases expired. Out of this 1722 cane leases or 59 per cent have been renewed.

Between 1997 and 2006, 5252 cane leases expired. 3001 cane leases or over 57 per cent leases were renewed. And under this government's stewardship from 2007 to 2018, 4272 leases will expire until 2017. And from 2007 until 2017, 2104 leases will be renewed. This is only 49.25 per cent rate of renewal.

(ii) Rising cost of cane production, harvesting and delivery. The average cost of cane production, harvesting and delivery was $45 per tonne of cane. Cane farming has become a non-profitable business for at least 70 per cent of farmers who produce only 30 per cent of the total cane crop while 30 per cent of farmers produce 70 per cent of the crop.

For 2013 season farmers received a little less than $89 per tonne. If one removes the cost of production, harvesting and delivery of cane of $45, the nett income that farmers get from a tonne of cane is $44.

70 per cent of farmers produce an average of 200 tonnes of cane. No doubt this has fallen to 150 tonnes last year. A little over 13,000 farmers are active growers. That leaves 9200 farmers in this category of average producers.

Their net income at $44 x 200 tonnes is $8800 in a season. And farmers receive this money over a period of 14 months. This is well below the tax threshold of $16,000. No commercial business can survive on this.

Since 2009, Government has pumped in $340 million into the Fiji Sugar Corporation through direct assistance and guarantees. And since 2009, cane farmers have received a meagre $47 million through Government subsidies. The reality is that the 2006 coup has put the industry in a coma.

The European Union had earmarked a total of $265 million in planned assistance between 2007 and 2013 to help Fiji adapt to globalisation and to lower prices of sugar exports to the EU because of the total withdrawal of preferential prices by 2009. This grant was lost.

It was aimed at economic diversification in the sugar sector and to provide assistance for social impact mitigation measures for displaced farmers who could not meet their increased cane production targets.

If the coup hadn't destroyed democracy, Fiji could have now been producing about four million tonnes of cane and manufacturing about 400,000 tonnes of sugar. The sugar industry would have been salvaged.

Fiji and the cane farmers are poorer for the loss of the EU grant.

The Government is urging farmers to plant more cane but this will not become a reality This is because the imminent reduction in the price of sugar cane is a hammer-blow to canegrowers.

The Prime Minister has also rejected calls for a bi-partisan approach to find solutions to revive the industry through a parliamentary select committee on sugar. Such a committee has always been in existence throughout our history of parliamentary democracy but is sorely absent this time around.

The establishment of a parliamentary select committee on sugar and the convening of the SCGC elections, which was first cancelled by the interim Cabinet in 2008 based on a recommendation of his then sugar minister, would be an ideal start for the instilling of confidence in cane farmers.

Also the Sugar Ministry has been a separate portfolio in all governments since Independence. But here we see that the Prime Minister is responsible for sugar. But at the same time the PM's devotion of time towards the industry is limited because of his hectic schedule and overseas travel. For Government to do justice, Sugar must have a separate ministry.

The lip service being paid to the industry was confirmed during the recent Fiji Economy Update at the USP.

Deputy governor or the Reserve Bank of Fiji (Ariff Ali) said the sugar industry was no longer a significant part of the economy and that the country could not rely on it anymore. This was reported by The Fiji Times on July 16. This is an insult to canefarmers and the 200,000 people, which is more than 20 per cent of our population, who are directly or indirectly dependent on it.

They deserve honest answers and all stakeholders in the sugar industry owe it to them to be transparent and accountable.

* Bala Dass is the General Secretary - Fiji Cane Growers Association

Excerpts of a speech

delivered to the Fiji Economy Update organised by the USP at Tanoa Waterfront Hotel in Lautoka on July 24, 2015.