November 18, 2019
Beatrice M. Laforga (Business World) | https://bit.ly/2qYnJIf
THE Department of Finance (DoF) has proposed to raise the share of the sugar crop retained by sugar millers to give them more incentive to raise their efficiency levels, floating the restructuring of the planter-miller relationship as a possible alternative to liberalizing sugar imports.
Finance Secretary Carlos G. Dominguez III told reporters last week that he proposed that Senate Majority Leader Juan Miguel F. Zubiri consult the industry on increasing the millers’ take to encourage them to upgrade their machinery and improve their sugar-extraction yields.
Mr. Dominguez said the industry could look into a “new kind of relationship between a mill and the planter” since under the law, the mills get 30-40% of the crop while 60-70% goes to the planter, depending on the area.
Senators recently passed a resolution opposing the liberalization of sugar imports proposed by the DoF as a means of bringing down prices and making the food industry more competitive. The resolution cited the possible impact of liberalization on sugar industry jobs and the livelihood of small farmers.
“I also told Senator Zubiri that the other problem is the legislation that regulates the relationship between the planter and the mill.. Because of that, the mills have no incentive to invest capital to improve the efficiency of their mill,” he said.
Millers extract syrup from cane, producing raw sugar crystals for refining.
With more capital, Mr. Dominguez said the mills can upgrade their technology and raise yields.
“When you put in capital expenditure, you only are able to recover 30-40% of the revenue of the mill because the balance goes to the sugar planter. Why should they put 100% of the capital expenditure and only reap 30-40% of that,” he said.
He said that the sugar shortages and high domestic prices should be addressed immediately as the population grows and other producers become more competitive.
“If you look worldwide, the mills and the farmers do not share. The mill buys the cane. So if they own the whole cane then they can extract, they have every incentive to extract the most amount of sugar so I don’t really know what will come out but the current system has to be changed,” he said.
The DoF formally proposed to lift the quantitative restrictions on sugar imports in a process likened to the liberalization of rice imports, a prospect that led the politically well-connected sugar industry to mobilize opposition.
“We will respect the desire of the Senate to discuss this at length and I think it’s the right move,” he said.
In an economic bulletin, the DoF said that quantitative restrictions on sugar imports need to be replaced with tariffs in order to make prices more competitive for the food industry competitive prices.
A month later, the recommendation was opposed by the legislators after the Senate unanimously passed a resolution claiming that liberalizing imports will not make the industry.
Mr. Zubiri has said that instead of opening up the market to cheaper sugar imports, the economic team should instead focus on the full implementation of the Republic Act. No. 10659 or the Sugar Industry Development Act (SIDA) of 2015.
A component of the law is a productivity enhancement programs, infrastructure support such as farm-to-mill roads, research programs as well as financial support to small farmers.
“We will discuss it with them but I said we’re not only going to be talking about liberalization (but) also about improving the efficiency of the mills, how to incentivize that. Of course on the cane production side, it’s a long discussion,” Mr. Dominguez said.