Sugar fears

THE loss of $19.3million by the Fiji Sugar Corporation has raised concerns on the viability of the sugar industry.

Stakeholders said the loss meant the entire industry could be faced with losses.

University of the South Pacific academic Doctor Mahendra Reddy said FSC's loss showed a serious flaw in its management of the mills.

"The mills are not able to separate variable costs from fixed costs. What is happening is production has been declining but there is no corresponding decline in variable costs," said Dr Reddy.

"So mills are operating below capacity and the management is not able to reduce its operating expenditure to match the decline in output. Obviously, we will see the mills making losses.

"Unless the FSC and the mills are allowed to operate in flexible factor markets, it will be very difficult to make profits. Furthermore, FSC is caught up in a very difficult situation."

Dr Reddy said the corporation made massive industry capital investment.

"When the supply side is not keeping up with the capacity of the mills, the mills can not do much as the capital infrastructure is industry specific. So in the reform process, they must also examine how they can make their capital infrastructure multi-purpose," Dr Reddy said.

Sugar Cane Growers Council chairman Jain Kumar said the corporation needed to pull up its socks.

He said serious consideration decisions should be made to ensure the industry's viability.

Fiji Cane Growers Association general secretary Bala Dass questioned the management of the corporation, saying it had failed to make good decisions to sustain the industry.

He said the sugar reforms have been there for four years but no action was taken.

FSC recorded an operating loss of $19.3-million, compared to an operating profit of $6.6m in the previous year.

The results were for the year ended May 31, 2008.

In a statement issued last week, the corporation had said the year under review was a pivotal year for it and the sugar industry.

The corporation recorded one of the biggest losses in recent years.

It reinforced the need for the sugar industry to be restructured so "it becomes competitive in the international market and meets the stakeholder expectations".

The corporation said that while it was encouraging to see the added focus on accelerating the progress of the sugar industry reform program, the corporation's trading performance was disappointing, which saw a sharp decline in cane and sugar production.

The corporation said to bring the sugar industry back to global competitiveness and prepare the industry to survive the reductions in the protocol sugar price to 14.3 per cent in 2008 and 36 per cent in aggregate by 2009, the implementation of the industry reforms was urgently required.

The statement said that the mill upgrading program had been delayed by almost two years and was a major concern as the upgrading was linked to the various other initiatives being considered as part of sugar industry reforms.

source:fijitimes