Choking the Small Cane Planters to Slow But Sure Death?
As a follow-up to the “Sugar to Cane” article I wrote in June 2018, this article sheds further light on the sad plight of the small cane planters. Many are compelled to abandon cane cultivation due to revenue depletion and cost escalation. They do not know who their real persecutor/benefactor is, nor at whose feet to lay their grievances – the sugar barons, the MSS, the MCIA, the minister, the Prime Minister or the Government?
They have been conditioned into acting individually and to forget their collective strength. They have been misled to believe that the politicians will defend and protect their interests “advitamaeternam”. But this has not been the case unfortunately. In the name of the small planters the sugar barons have always extracted more than their pound of flesh from successive governments. They have enjoyed all the benefits in terms of incentives, tax reliefs, or land conversion rights for morcellements, IRS and Smart Cities.
The Power of Bagasse
Income from sugar, molasses and bagasse has never been shared equitably with the small planters. Bagasse had no economic value for the millers/planters until 1997, even if the Bagasse Transfer Price Fund of Rs. 60m (for 600,000 MT bagasse or Rs 10./= per ton of Bagasse) was introduced in 1985. Production of electricity from bagasse is a typical illustration of this point. Before the first Independent Power Producers (IPPs) were officially licensed in 1997, all planters had to accept the 76/24(now 78/22) sugar apportionment ratio imposed by the MSPA/MSS/Govt to pay the millers for the conversion of cane into raw sugar. This 76/24 ratio was inclusive of steam generation from bagasse to run the sugar mill. Bagasse being of no economic value then the surplus bagasse was sold to flower growers, and used as livestock and as cooking fuel by the population. But gradually the sugar barons realised that bagasse could be a new source of income for them at zero cost. This triggered the demerging of large sugar estates into several revenue generating units.
As from 1994, sugar barons were allowed to split their estates (free of costs and taxes) into plantation and milling companies. This demerging accelerated in such a way that today one sugar estate (using an integrated facility, designed on the latest technology for greater economic efficiency) has been split into different profitable legal entities – plantation, sugar mill, power plant, sugar refinery, distillery (alcohol and ethanol) and CMs drying (for vinasse and liquid fertilisers). Each of these different entities is highly profitable because input costs are practically zero in the whole chain. And all this has been done with the passive complicity of successive Governments and the Regulators.
It is not a secret that the sugar oligarchy has utilised the cane industry and the arable sugar cane lands freely handed over to them by the colonial masters to diversify into other more lucrative sectors. Today they own several banks, hotels, buildings, distributive trade networks, supermarkets, universities, shopping malls, construction companies, shipping companies, petroleum companies, etc. Additionally they benefit from generous tax exemptions for IRS and Smart cities.
Bagasse has always been used free of cost by the millers/planters (IPPs) to produce electricity sold to the CEB. While bagasse payment to planters is made on a sugar accrued basis, electricity produced from the same bagasse is billed to the CEB on a KWh basis. The small planter receives hardly Rs 126/= per ton of bagasse but the sugar barons earn Rs 1,452 per ton from electricity generation. They are minting money out of bagasse while small planters are being choked to death. Yet all the champions of meritocracy and equal opportunities have stayed blind, dumb and deaf to this blatant injustice and discrimination committed against the small planters since independence. One can only wonder if the extinction of small planters is not being carefully planned in some quarters.
|ECONOMIC VALUE OF BAGASSE - 2016|
|Gross Electricity generated||GWh||497||3.3||1,640,100,000|
|Less Amount used by Distillery & refinery free of cost||GWh||129||3.3||425,700,000|
|Net electricity exported to CEB Grid||GWh||368||3.3||1,214,400,000|
|Total BagasseOutput for the year||Tons||1,129,545|
|STATISTICS PER TON BAGASSE|
|GrossEconomic valueper ton||Rs||1,452|
|Net Incomeof IPPs /ton||Rs||1,075|
|Free Electricity used by Sugar mill/Distillery/ refinery/ton||Rs||377|
|Small planters revenue per ton Bagasse( 1264/10 Mt ) 2017||Rs||126|
|Revenue lost on Bagasse per arpent for the small planter||Rs||14,520|
|Note1: CSO- Digest Of Energy & Water Statistics -2016|
|Note2: Page 97 NEC report|
It is the taxpayer and the CEB and not the IPPs that compensate the small planters for their bagasse. The sugar barons are paid twice for the same bagasse -once as bagasse entitlement and the other one on electricity sale. Based on the 2016 statistics, 497GWh of electricity worth Rs 1.6bn or 17.5% of domestic electricity was generated out of 1,129,545 tons of bagasse but only 368GWh was sold to the CEB for Rs1.2bn or at the rate of Rs 1,075 per ton of bagasse. The remaining 129GWh worth Rs 425m was utilised free of cost again by the sugar barons in their refineries and distilleries. Working backwards over to 1996 small planters who contribute 33% of cane to the mills can safely be said to have been ripped off of at leastRs10bn only on bagasse income. If this is not broad daylight robbery, what else can it be? Caviar for a few and not even bagasse for the many! Bagasse has a commercial value of its own in Reunion Islands and in India but not in Mauritius. In fact small planters have been unwittingly subsidising Government and the sugar barons over the last 20 years.
It is also worth noting that IPPs produce 73% of their electricity from coal and through the JTC report they are asking Government to pave the way for them to utilise other biomass for electricity generation like wood chips etc…… With the CEB now imposing a 50 coal/ 50 biomass or bagasse ratio on IPPs, it is the responsibility of Government to ensure that small planters are not left out of the equation. Because crowding out small planters from the cane sector can benefit the sugar barons only. Small planters’ revenue from bagasse must therefore be at par with that of the IPPs. If a ton of bagasse converted into electricity can fetch Rs 1,452 to the IPPs, then 10 tons of bagasse can bring Rs 14,520 per acre to the small planter. Why should he abandon his land if he is adequately compensated? Already Terragen and Alteo are paying Rs 1,500 per ton of cane trash collected from the field of planters to produce electricity( Rs 1,000 per ton of trash collected in bales from the planters field plus cost of baling & transport of Rs 500./= per ton trash collected). When we realise that cane trash and bagasse can generate the same amount of electricity we wonder why planters are not being adequately remunerated for their bagasse.
Sugar output in 2018 is estimated to be around 333,000Mt. Small planters are being unjustly blamed for the fall in sugar output for the 2018 harvest. The reality is that between 2012 to 2017 small planters have abandoned 2,400 hectares of land whereas during the same period the sugar barons have diverted some 4,000 ha for IRS, smart cities, gated townships. These properties are not only out of the reach of the Mauritian purse but are only sold to foreigners. And yet some are complaining of the loss of the outer island territories to foreigners! To add insult to injury the JTC of the sugar barons want a tax of Rs 5.5 m per hectare to be imposed on small planters who want to convert their lands. And the State has no clear policy of land use in Mauritius whether it is for agriculture, housing, sports, leisure, infrastructure, forest etc…
Mss - A Syndicate of the Sugar Barons Only?
According to the MSS Act 1951“The Mauritius Sugar Syndicate is the sole organisation responsible for the marketing of sugar produced in Mauritius; it has for object the sale of all sugars only and the distribution of the proceeds of sale’. In spite of the MSS Act 1951- “The Mauritius Sugar Syndicate is managed and administered, as provided by its Articles of Association (1967), by a main “Committee made up 14 representatives of the corporate sector ( the permanent fixtures)and 8 representatives of large and small cane planters appointed by the Minister for Agriculture “. Ironically the CEO of the MCIA – the regulator also sits on the Board of the MSS (judge & party at the same time.) But the main decisions of the MSS are taken by a subcommittee which determines the compensation to planters after feeding the fat cows of the industry.
More than ever before the MSS functions as a private members’ club at the whims and fancies of the sugar barons. For illustrative purposes Mauritius has two sugar refineries with a total refining capacity of about 350,000 MT. It is echoed that the MSS has entered into a contractual agreement with the two refineries to guarantee them a supply of 370,000 Mt sugar for refining purposes at a price of EUR 65 per ton. Any shortfall in such supply entails a penalty of EUR 45 per ton or RS 1,800 per ton sugar. The legality of this agreement is highly questionable because the penalty compensation payable to the refineries is financed out of sugar proceeds payable to the cane planters.
Anybody with some common sense would see that this is a diversion of planters’ money- not to say a FRAUD. How can the MSS enter into such a deal when our annual sugar production is 330,000MT only out of which 125,000Mt are reserved for Special Sugars? The opacity surrounding this agreement is a matter of concern.
None of the board members of the MSS has been provided with a copy thereof. Yet the representatives of the sugar barons sitting on the Board of the MCIA are provided with all strategic papers concerning the industry in the name of transparency and public private partnership.
Another similar case is that of Medine S.E. This mill produces Plantation White Sugar (PWS) which is sent to Omnicane for conversion into WRS, under a contractual agreement that Omnicane would pay a premium to Medine at the rate of EUR 40 per ton of PWS. However at the end of the contract in 2015 this compensation is now being paid by the MSS once again out of sugar proceeds of planters. Provision for the same has been made in the 2017 accounts of the MSS. And this decision has apparently received the approval of Government and the MCIA. No wonder then that the small planter will continue to receive RS 9,700 per ton sugar when White Refined sugar (WRS) is exported at Rs 18,000 per ton and Special Sugar is sold at Rs 30,000 per ton. Is it any surprise that the small planter will abandon his lands?
It is of utmost importance that the regulators especially the MCIA and the policy makers wake up from their sleep and rectify this alarming situation before the small planters are choked to death by the powerful economic vested interests. This is an economic battle which has to be fought by economic arguments and not by paying lip service to political rhetoric. Small planters are abandoning cane cultivation on economic grounds only but they constitute a solid economic community and a sizeable vote bank. They constitute a group of not less than 30,000 representing a vote bank of 120,000 or more or 6,000 per constituency. This plain truth must be reckoned by those who have to choose between political financing from a few and the votes of the many.