Sweets also go to the private sector

The three sugar mills now owe Tk 7,700 crore to different state-owned commercial and specialty banks

20 April 2022, 12:00

Last modification: April 20, 2022, 3:00 PM

After sending the state-owned jute mills to the private sector citing losses over the years, the government is now considering the privatization of state-owned sugar mills as well.

Frustrated by the huge amount of losses and accumulated debt, the government is now considering selling three state-owned sugar mills to a foreign consortium.

The Sugar International Company – a joint consortium of three companies from Japan, Thailand and the United Arab Emirates (UAE) – has proposed to invest around Tk 5,000 crore in three state-owned sugar mills: Setabganj in Dinajpur, Mobarakganj in Jhenaidah and Rajshahi. Sugar mills. The consortium, led by Sharkara International of the United Arab Emirates, has offered to run the factories jointly with the government.

The three sugar mills now owe Tk 7,700 crore to various state-owned commercial and specialty banks.

An inter-ministerial meeting, chaired by Cabinet Secretary Khandaker Anwarul Islam and attended by top executives of these banks, was held at the Secretariat on Tuesday to consider the proposal.

After the meeting, Chairman of Bangladesh Sugar and Food Industries Corporation (BSFIC), Md Arifur Rahman Apu, told The Business Standard: “Sharkara International’s offer to invest in three sugar mills has been discussed but no decision has been taken. final was taken today. Another meeting will take place. to discuss the matter in depth and make a final decision.”

SM Alam, deputy secretary of the ministries of industry (public company), told TBS that the consortium of foreign companies will provide the necessary financing to jointly operate the sugar mills. The proposal was discussed at the meeting. A final decision could be taken at the next meeting on Wednesday.”

Infographic: TBS

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Infographic: TBS

There are 15 state-owned sugar factories and one engineering factory under the Bangladesh Sugar and Food Industries Corporation. All sugar mills suffer huge losses every year, except Carew & Co. The engineering plant that repairs machinery for sugar mills or manufactures accessories for mills is also at a loss.

The Carew & Co, the only licensed distillery in Bangladesh producing alcohol from sugar molasses, is making a profit, but its sugar segment is also suffering huge losses.

For various reasons, including paying high interest on bank loans and not getting the expected sugarcane juice, the cost per kg of sugar produced in government sugar factories is around 300 Th, but it is sold at a subsidized price of TK 80 per kg. .

Government sugar factories suffer losses of hundreds of taka crore every year due to the low selling price, although the cost of production is about four times higher.

Even though the government tries to keep the factories afloat with subsidies for years, there is no sign of improvement; on the contrary, from year to year, sweets are increasingly lagging behind.

However, the supply from government sugar mills is far below the total annual demand for sugar in the country, which is around 18 million metric tons. More than 90% of demand is met by the private sector. After importing raw sugar, private entrepreneurs produce refined sugar and sell it on the market.

In the 2020-21 financial year, sugar production in public sugar factories was the lowest. About 48,000 metric tons of sugar were produced this fiscal year, almost half of the production of the previous fiscal year when 82,000 metric tons of sugar were produced.

According to the sugar and food industry, the accumulated loss in 14 sugar factories up to the financial year 2020-21 is Tk 8051.36 crore. In the fiscal year 2020-21 alone, the loss was Tk 933 crore.

In addition to the lack of raw materials, the machinery of state-owned sugar mills is obsolete. Despite the decline in sugar extraction from cane threshing, the Sugar and Food Industries Corporation has set a target of 1.15 lakh metric tons of sugar production in the fiscal year 2020-21. However, only 48,000 metric tons were actually produced.

The Sugar and Food Industries Corporation believes production has fallen due to the halt in cane threshing at six sugar mills.

At the end of 2020, the government announced the cessation of sugar cane threshing in six sugar factories with a loss. Describing the closure as temporary, the government however promised that the factories would be reopened after the modernization.

The Bangladesh Sugar and Food Industries Corporation was established in 1976, merging the Bangladesh Sugar Mills Corporation and the Bangladesh Food and Allied Industries Corporation.

Rachel J. Bradford