Home ›› 15 Jul 2021 ›› World Biz
The government suffered a loss of up to Tk 232 per kilogramme of sugar in the last fiscal year as the production cost soared to Tk 300 from Tk 194.
At mill gates, sugar was sold at Tk 68.
It is apprehended that the government’s likely decision to halt sugar production at Rajshahi and Faridpur mills this fiscal will push up the prime cost further.
Bangladesh Sugar and Food Industries Corporation (BSFIC) blamed payment of high loan interest, less extraction of juice from sugarcane, low percentage of sugar recovery and inefficiency of workers for the perennial rise in production cost.
Nine mills produced 48,000 tonnes of sugar in FY21 while the production was 82,140 tonnes by 15 mills in FY2019-20. In FY19 and FY18, production was 68,952 tonnes and 59,975 tonnes respectively.
In the last fiscal, the government halted production at six mills in order to rein in the sustained losses that contributed to the higher production cost as the corporation had to bear salary expense of staffers at those mills. The corporation sold per kg sugar at Tk 68 at mill gate to the retailers in the whole of last fiscal year.
As per the BSFIC data, the corporation incurred a loss of Tk 933.61 crore in FY2019-20, which was Tk 1,006.54 crore a year ago.
It claims that loss will come down if the sale amount of Chitagur, a bi-product of sugar, was added to sugar sale.
“Our production cost is going through the roof due to high loan interest. It costs below Tk 100 for some mills to produce a kg of sugar, but when we consider the interest amount, the cost more than doubles,” BSFIC Director (Planning and Development) Anwarul Alam told The Business Post.
“It is a burden for us. We are planning on how to get rid of high bank loan interest. The government is also concerned about it.”
According to the corporation, 11,232 people are employed at 15 sugar mills and head office. Of them, 714 are officers and the rest are general employees.
In FY20, the sugar and food industries corporation spent Tk 1,596 core. Of the amount, Tk 513 core went for sugarcane purchase, Tk 539 core for payment of interest in bank loan and the rest for workers’ salaries and other expenses.
Why production costs soar
Apart from high loan interest payment, less extraction of juice from sugarcane, corruption, low percentage of sugar recovery and inefficiency of workers, the government halted production at six mills due to which the overall production fell by around 50 per cent in FY21 over the previous fiscal– another reason behind the rise in production cost in FY21.
“Our factory machinery is not good enough, so is the quality of sugarcane cultivated by farmers. In addition, we can’t harvest sugar in real time,” said Director (Production) Md Enayet Hossain.
By the time the government stopped production at six mills, sugarcane used to be transported from one area to another. To get the best out of sugarcane, it requires that they be crushed within 24 hours, but in most cases, it fails.
“The overall cost divided by a total production determines the production cost. Our production has fallen. As a result, the cost of per kg sugar production has gone high,” said Chowdhury Ruhul Alam Kaysar, secretary to BSFIC.
Talking to the officials at the Ministry of Industries and the corporation, it became evident that BSFIC authorities do not have a clear concept of how it would reduce loss and make profit. Also, they don’t know how many factories will be operating this fiscal and what their plans are for that.
According to the Ministry of Industries, Bangladesh has 15 sugar mills where 13 were established before 1971. Now their liability is Tk 7,889 core, of which bank debt is Tk 7,343 core.
In the previous FY, the amount of money paid in loan interest by the sugar mills accounted for 34 per cent of per kg sugar production cost.
On the other hand, the government unofficially decided to postpone sugar production at Rajshahi and Faridpur sugar mills this fiscal. If it is implemented, only seven sugar mills will be running, thereby spiking the production cost further.
In FY20, the corporation recovered only 5.8 per cent sugar where the largest producer in the world Brazil recovers 14 per cent.
In FY1989-90, BSFIC achieved the highest sugar recovery about 8.77 per cent. The last 10-year average sugar recovery is around 6.28 per cent.
The purchase price of sugarcane is also on an upward trajectory. In FY20 and FY21, the corporation bought per ton of sugarcane at Tk 3,500 while it was Tk 3,125 in FY18, Tk 2,750 in FY17 and FY16.
Besides, in FY20, it paid to farmers Tk 513.44 core for sugarcane while in FY16 it was Tk 267.90 core.
Insiders said a group of unscrupulous officials at mills and corporation resort to large scale corruption in the process of sugarcane purchase.
According to experts, the government should either shy away from producing sugar as it is a loss-making sector or it should bring a revolutionary change to the production process, besides overhauling the entire management concerned as well as machinery.
If the government decides to go for a total shutdown, then at first it must create an alternative option for farmers, they suggested.
In reply to a query about the timeless loss relating to sugar production, noted economist Mirza Azizul Islam said: “It is pointless to keep the sugar mills running when there is no profit.”
Rather, it should be worthwhile if the sugarcane growers are trained how to make jaggery (Gur) so that they can make a living through sugarcane farming, he suggested.
“The state-owned sugar mills fulfill only 2 to 3 per cent of total domestic demand. Even the closure of six mills did not have any effect in local market,” said Khondaker Golam Moazzem, research director (Industrial Economy), Centre for Policy Dialogue. “So, why should the government run the mills incurring a huge loss?” he asked, saying the government should keep only those sugar mills in operation which are making profits.
The private sector imports crude sugar, refines it and makes profit by selling per kg sugar at Tk 68 to Tk 70.
This July, per kg sugar price in international market was Tk 33.66, according to Business Insider Inc, an international business portal.
