After sending the public jute mills to the private sector citing losses over the years, the government is now considering privatisation of the state-owned sugar mills also.
Frustrated by the huge amount of losses and accumulated debt, the government is now contemplating to hand over 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 Tk5,000 crore in three state-owned sugar mills: Setabganj in Dinajpur, Mobarakganj in Jhenaidah and Rajshahi Sugar Mills. The consortium, led by Sharkara International of UAE, has proposed to run the mills jointly with the government.
The three sugar mills now owe Tk7,700 crore to different state-owned commercial and specialised banks.
An inter-ministerial meeting, chaired by Cabinet Secretary Khandaker Anwarul Islam and attended by the top executives of those banks, was held at the Secretariat on Tuesday to review the proposal.
After the meeting, Bangladesh Sugar and Food Industries Corporation (BSFIC) Chairman Md Arifur Rahman Apu told The Business Standard, "Sharkara International's offer to invest in three sugar mills has been discussed but no final decision has been made today. Another meeting will be held to discuss the issue in-depth, and to make a final decision."
SM Alam, additional secretary to the industry ministries (state-owned corporation), told TBS that the consortium of foreign companies would provide the funding needed to run the sugar mills jointly. The proposal was reviewed at the meeting. A final decision may be made at the next meeting on Wednesday."
There are 15 state-owned sugar mills and an engineering factory under the Bangladesh Sugar and Food Industries Corporation. All the sugar mills are incurring huge losses every year save Carew & Co. The engineering factory which repairs machines of the sugar mills, or manufactures accessories for the mills, is also in loss.
The Carew & Co, the only licensed distillery in Bangladesh producing alcohol made from sugar molasses, is making profits, but its sugar segment also incurs huge losses.
Due to various reasons including payment of high interest against the bank loans and not getting the expected juice from sugarcane, the cost of per kg of sugar produced in government sugar mills is around Th300, but it is sold at a subsidised price of TK80 per kg.
The government sugar mills are incurring losses worth hundreds of crores of taka every year due to the low selling price, although the production cost is around four times more.
Even though the government is trying to keep the mills afloat with subsidies for years, there is no sign of improvement; instead, year by year, the sugar mills are lagging behind more and more.
However, the supply of government sugar mills is far less than the total annual demand for sugar in the country which is about 18 million metric tonnes. More than 90% of the demand is met by the private sector. After importing raw sugar, private entrepreneurs produce refined sugar and sell it in the market.
In the fiscal year 2020-21, sugar production in state-owned mills was the lowest. Around 48,000 metric tonnes of sugar was produced in that fiscal year which is almost half of the production of the previous fiscal year when 82,000 metric tonnes of sugar was produced.
According to the sugar and food industry, the accumulated loss in 14 sugar mills till fiscal 2020-21 is Tk8051.36 crore. In the 2020-21 fiscal year alone, the loss was Tk933 crore.
Besides the lack of raw material, the machinery of the state-owned sugar mills are old. Despite declining sugar extraction from sugarcane threshing, the Sugar and Food Industries Corporation set a target of 1.15 lakh metric tonnes of sugar production in fiscal 2020-21. However, only 48,000 metric tonnes was actually produced.
The Sugar and Food Industries Corporation thinks that the production has decreased due to the stoppage of sugarcane threshing in six sugar mills.
At the end of 2020, the government announced to stop threshing sugarcane in six loss-incurring sugar mills. Terming the shutdown temporary, the government, however, promised that the mills would be reopened after modernisation.
Bangladesh Sugar and Food Industries Corporation was formed in 1976, merging the Bangladesh Sugar Mills Corporation and Bangladesh Food and Allied Industries Corporation.