All seven sugar estates are currently operating at a loss, according to the Chairman of the Commis-sion of Inquiry (CoI) into the sugar industry, Vibert Parvatan.
Stabroek News was told yesterday that the break-even point was being determined. When asked to expand on this Parvatan confirmed that this was the case but he did not expect that this feature would be a determining factor in the CoI report to be submitted to the Minister of Agriculture on October 17.
This newspaper was made to understand that the sugar corporation’s break-even point was so far exceeded that it would not be responsible to postulate to the public that this was an attainable reality within the coming months. The Chairman did not elaborate when asked by Stabroek News to respond to the information. However, he did note that production costs were alarmingly high.
He said that the preliminary reporting from the CoI has shown that none of the estates was turning a profit and the industry’s average cost of production was a whopping US$0.45 per pound of sugar. He said that when he initially spoke at a press briefing on Friday the world market price was roughly US$0.13 per pound of sugar.
Guyana still benefits from a more lucrative-priced market, however the preferential pricing has been significantly declining and will completely end in 2017 when the arrangement between African, Caribbean and Pacific (ACP) countries and the European Union (EU) expires. Parvatan said that over 75% of Guyana’s raw cane sugar was sold to the EU with the remainder being locally consumed or sold within the Caribbean market and a smaller percentage is being sold to the United States.
This newspaper was told that even while the Berbice estates have a more reasonable cost of production the Skeldon estate and the West Demerara estates, Wales and Uitvlugt, are driving this figure up. Stabroek News was made to understand that Skeldon’s cost of production is in the range of US$0.50-US$0.55 per pound of sugar. The chairman stated that he was not able to disclose the various production costs by estate when he spoke to Stabroek News yesterday.
The much-vaunted Skeldon Sugar Modernisa-tion Programme devised under the Jagdeo administration had been intended to create a brighter future for the industry but is now seen as a millstone around its neck.
Parvatan said that the revelations as it relates to the operating loss at all seven estates as well as the high production costs showcase once and for all that government bailouts and subsidies simply cannot be sustained. Parvatan stated that the financial records indicate that GuySuCo ran at a loss of $17B last year.
Chairman of the GuySuCo Board, Dr Clive Thomas recently told Stabroek News that the corporation was effectively bankrupt and $82B in debt. The figure has risen by $24 billion from the disclosure made before the National Assembly’s Economic Services Committee last July, when then Director of Finance Paul Bhim said the total debt was $58 billion.
The CoI Chairman noted that GuySuCo is not being simply thought of as a business and as such both the previous administration and the new coalition government have sought to pump money into the industry. “(With) the rising cost of production, especially the labour costs which have been climbing over the past five years, GuySuCo has been running at a loss climaxing last year, their loss last year was $17B. The government was compelled to subsidise given the importance of the industry,” Parvatan stated.
He added “given the insolvency the answer to the problem would have been clear, but in the context of Guyana you can’t just view GuySuCo as a business. It touches the lives of Guyanese from the Corentyne along the Atlantic Ocean all the way to Parika. There are many spin off economic activities.”
He said that this vastness of the industry and the amount of information that was collected during the course of the CoI has made it impossible for the final report to comply with the three-month timeframe and as such mid-October had become the new deadline.
Parvatan told Stabroek News that the delay in the start of the second crop had prevented the commission team that was designated to look at the factory operations from performing their investigation promptly. The Chairman explain-ed that the commissioners were able to speak to persons during the off season and look at the maintenance of the factories but just as important was getting a clear idea of how the factories operate during the grinding period.
He noted that while Blairmont was the first factory to begin grinding it took an additional three weeks into August for the remaining estates to come on line including Skeldon which was the last to do so. (Pushpa Balgobin)
