Sugar is one of the very few essential commodities that have not been troubling their consumers for a reasonable period of time. Rather, unlike most other essentials, its price has gone down by more than 33 per cent over the period of last three years! Given the unabated rise in the cost of living for the past few years this has been a welcome development as far as the consumers here are concerned.
But there is another side of the story. The decline in the price of sugar at the retailers' level has been the outcome of a price war between the private sector importers and refiners and the public sector producers of the commodity.
However, the war has been an uneven one and the public sector sugar mills are bearing the main burnt of it.
It may sound incredible though, the state-owned sugar mills under the control of the Bangladesh Sugar and Food Industries Corporation (BSFIC) are now incurring a loss of Tk 33 against the sale of a kilogramme of sugar. The average cost of production of a kg of sugar produced by the BSFIC sugar mills is estimated at Tk 77 and the sale price of the same has been fixed at Tk 40.
Yet there are virtually no takers of sugar of the state-owned mills which reduced the price of their commodity on four occasions during the last three years. According to a newspaper report, these mills until the second week of the last month had an unsold sugar stock of 178,000 metric tonnes valued at about Tk 14.50 billion, in terms of its cost of production.
On the other hand, the cost of production (the private sector mills generally refine the imported raw sugar before marketing) of a kg of sugar by the relevant private entities is estimated at Tk 43. But they sell the same to their dealers at Tk 42. The private sugar manufacturers, reportedly, have also been incurring losses for the last couple of years, mainly due to the lowering of price by the public sector sugar mills.
However, the private sector operators do enjoy certain advantages over their public sector counterparts. The former also deal in other essentials such as edible oils, flour and they somehow recover the loss suffered on account of sugar by 'adjusting' the prices of 'other' items.
The public sector sugar mills do not have that kind of advantage. They do not have any option other than seeking help, financial or otherwise, from the BSFIC, whenever necessary.
In fact, the public sector sugar mills, like most of the state-owned enterprises (SoEs), are a burden on the government. The mills, equipped with outdated and old machinery and equipment, have manpower well beyond their paying capacity. Besides, the sugar produced by these mills is dull in colour and texture. Its very look remains to be unattractive compared to the sugar imported and refined by the private mills.
It seems that the government is allowing the terribly sick state-owned sugar mills to carry on with their operations for the sake of their hundreds of workers and employees and help the sugarcane growers survive.
While the public sector mills were forced to reduce the price of their produce in the face of stiff competition from the private sector sugar importers, the former had enhanced the procurement price of sugarcane last year. The hike had contributed to further escalation of the cost of production of their sugar.
The current state of affairs with the public sector sugar mills does not justify their existence. The government, in fact, is left with two options: either these mills will have to be divested or restructured under a well-designed BMRE (balancing, modernization, rehabilitation and expansion) programme.
The BMRE should put particular emphasis on installation of modern equipment and trimming of the existing manpower as far as possible. However, the most preferred option should be to hand over the mills to the private sector for even with the best of plans, the SoEs in this country fail to perform and ultimately become a burden on the government.
But, unfortunately, both the policymakers and relevant others avoid taking the right decision for fear of adverse reactions, temporary or otherwise. Besides, the bureaucrats who tend to reap the maximum possible benefits from the SoEs try to torpedo any move to privatise the same on different pretexts. So, the divestment of the public sector sugar mills might prove to be an uphill task for the government. Â
zahidmar10@gmail.com
State sugar mills: Casualty of a price war
Shamsul Huq Zahid | Published: August 04, 2014 00:00:00 | Updated: November 30, 2024 06:01:00
Share if you like