Tuesday, 18 June 2019

Sugar Industry: a Bleak Future, NFP's Biman Prasad's Response to the Budget

A response to the 2019-2020 Budget by National Federation Party leader Prof Biman Prasad.(See also previous posting, pn424.) My sub-heading. -- ACW.
pn423
Less than 24 hours after the Fiji First Government rejected a Motion by the National Federation Party for  the establishment of a bipartisan parliamentary select committee on sugar to find solutions to rejuvenate our sugar industry, the Fiji Sugar Corporation announced one of the lowest forecast prices in recent years for sugarcane for the 2019 season. 



Lower prices per tonne than last year
The price of $53.69 per tonne of cane for this season is well below the forecast price of around $66 for the 2018 season. This  has further dampened the morale of cane growers, especially at a time when they are supposed to be busily preparing for the start of the season which starts in a few weeks beginning at the Labasa sugar mill. The delivery payment of around $32 for this season is simply not enough to cover the harvesting and transportation costs that will be incurred by growers. 

So, unless something is done immediately to redress this issue, growers will simply find it impossible to prepare for the 2019 season. 

Already, growers are struggling to prepare for the start of the season due to severe financial constraints. So far for the 2018 season, they have been paid a little over $61 per tonne with over $23 outstanding based on government’s announcement last year of a minimum price of $85 per tonne of cane for three years.

Growers still owed money after 16 months
And based on the 2018 total cane crop of 1.631 million tonnes, growers are still owed over $41 million in cane payments. The fourth cane payment is due before May 31 (sic!)  or in less than 9 days’ time. The final or commonly referred to as ‘wash-up payment’ is due before 31st October this year. 

No other business or commercial entity is owed money for its supply of goods for more than 16 months after the services were first delivered. The only exception is commercial banks and lending institutions – but they supply goods in the form of lending funds. And they charge interest on the loans disbursed. And that is why they are profitable.
Our cane growers do not have that luxury of charging interest on overdue returns owed to them. The return on their back-breaking hard work is negligible. 

The 2018 FSC Annual Report statistics should ring alarm bells and wake the authorities into action. But it has gone largely unnoticed or at best ignored. The Report stated that in 2018 there was only 11,871 active growers whose average production was 137 tonnes of cane per season. 

70% of our growers are average producers. Based on FSC’s 2018 statistics, 8,309 growers produced 137 tonnes of cane and we believe this was even less than that. 

But even if 137 tonnes average  is the benchmark, then 8,309 growers would have earned, if the $85 per tonne of minimum price is fulfilled, a nett. income of $4,795 minus production, harvesting and delivery cost of an average of $50 per tonne of cane. 

This is  $1,476.20 less than the $6,271.20 a worker, working for 45 hours per week, would earn on the current meagre minimum wage rate of $2.68 an hour, inclusive of his or her 8% FNPF contribution. 

Does this painful reality dawn on the Prime Minister who is also the Minister for Sugar who told Parliament on Friday 17th May that it wasn’t the sugar industry but the NFP which was failing?

We  expect the PM and Minister for Sugar to give serious attention to the problems faced by growers. And ensure that their return is commensurate with their toil and sweat. 

Had Government listened to our advice in 2016...
This is not the time to rake over smouldering embers. But we just want to emphasise the point, that had government listened to what we had been repeatedly saying and suggesting to them – we would have seen a thriving industry today. 

In July 2016, we moved an amendment  during debate on  the 2016-17 budget to implement a minimum guaranteed price of $90 per tonne of cane for a period of four years starting from the 2016 harvesting and crushing season. I had sought  to increase the budgetary allocation for sugar from Head 50 for this worthy cause. 

It would have cost government a maximum of $50m to ensure both a guaranteed price as well as support for our landowners. It would have instilled confidence in our growers and reduced the need to offer cane planting grants that is not working because we don’t see increase in tonnage or acreage under sugarcane. It wasn’t until last year that government decided to implement a minimum price of $85 per tonne. 

This week my office has been called by more than 100 cane farmers who say they don’t have the money to prepare for the start of the 2019 season. 

This means that unless growers receive a minimum of $15 to $18 per tonne in the 4th payment, it will be difficult for them to prepare for harvesting. They have to meet many expenses including hiring of cane cutters or where mechanical harvesters are needed – with the growers footing its operational bill and paying for the operator.

Load restrictions: costs will be passed on
Then growers are worried as to what will happen with the new restrictions imposed on carrying of cane loads. Cane lorries can now only cart a maximum of 9 tonnes. They risk being fined $1000 a tonne for any extra load they carry – they were exempted before and carried 12 to 15 tonnes. 

This means cane lorries will ask for more cartage fees – additional runs mean growers have to spend more and cane cutters will demand extra payment than the average of $20 per tonne they are paid because cutting and loading only 9 tonnes in a day doesn’t pay them enough as they don’t operate individually but as a harvesting gang. 

Expiring leases
Then there is the issue of expiring land leases. The new approach adopted by the military and Fiji First governments to enforce lease renewals have failed. There is no use blaming the past governments and politicians. The current government has been in absolute control of the industry for over 12 years. 

Despite the Prime Minister being Minister for i-Taukei Affairs and Chairman of ITLTB Board, lease renewal is a big problem. For example, many, many productive growers in Nadi, particularly, Nawaicoba, have been given the option of leasing only 7 acres of their vast arable land for sugarcane cultivation. This is the sad but unmistakable reality. 

It is therefore not surprising that the number of active cane growers have declined from over 18,000 in 2006 before the military coup to less than 12,000. 

These are some of the problems that growers are currently facing. It is meaningless to gloss over their concerns and lead them up the garden path because our growers are fed up with fairy tales. 

They want answers – and the current government owes them this in the form of meaningful and practical solutions.

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