Fund crunch hits sugar mills hard

The state-run sugar mills have long been facing severe financial crisis, hampering their operational activities seriously, officials said.
"The cash-strapped sugar mills are still struggling to meet regular expenses. The Bangladesh Sugar and Food Industries Corporation (BSFIC) is also finding it difficult to service its bank debts and make payments on account of required funds," a BSFIC official told the FE on Friday.
The corporation urgently requires funds to continue with its operational activities.
The 15 mills under the BSFIC incurred an aggregate loss of about Tk 5.22 billion in the fiscal year (FY) 2014-15 while Tk 5.64 billion in FY 2013-14, Tk 3.10 billion in FY 2012-13 and Tk 2.90 billion in FY 2011-12.
These mills produce sugar from sugarcane supplied by its contract growers. Nearly 67 per cent out of the total operational expenditures of the state-owned sugar mills goes to the production of sugar. Some 20-24 per cent is spent on payment of bank interest and charges, a source concerned said.
The state-run mills cannot produce sugar at desired level despite having the capacity due to lack of necessary raw materials. Besides, the production cost of sugar by the state-owned sugar mills is more than its selling prices. As a result, the mills are incurring heavy losses, even after the recent substantial hike in sugar pieces, he added.
"We need financial support from the government to pay salaries to the workers and continue with other activities of the mills," the source said.
The BSFIC needs some Tk 3.0 billion to pay salaries to its employees and officials annually and to procure sugarcane as the sugarcane crushing season has already started in the 15 mills, he mentioned.
In August last year (2015), the government raised the duty on per tonne of crude sugar from Tk 2,000 to Tk 7,000 when there was a slump in international sugar prices.
In December same year, the government hiked tariff value of imported sugar by $ 30 per tonne and levied 15 per cent VAT on both refined and crude sugar.
The state-owned mills meet only 10 per cent of the country's total sugar demand. The rest of the demand is met by the private refiners.
The country requires 1.5 million tonnes of refined sugar every year, most of which is met through imports. On an average, 0.11 million (1.1 lakh) tonnes of sugar are needed every month, according to the available data. A total of 15 local mills under BSFIC produce over 0.1 million tonnes of sugar each year, the data showed.
About 1.4-1.5 million tonnes of crude sugar are imported a year which are released in the market after refining, a sugar importer said.
The government has kept stocks of some sugar to rein in any sudden price hike, a source concerned said.
Chairman (In-Charge) of BSFIC AKM Delwer Hussain could not be reached over phone for his comments in this regard.
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