Says slashing of GuySuCo capital budget a clear indication
The PNCR yesterday repeated its view that the sugar industry is in a major crisis and cited the drastic slashing of the Guyana Sugar Corporation’s (GuySuCo) capital budget as a clear indication of this.
The People’s National Congress (PNCR) also pointed to problems in fertilizer acquisition and availability of labour as other major worries.
The party declared at a press briefing yesterday that it has been monitoring the corporation closely and is in receipt of information about the corporation which it finds “disturbing” and feels duty bound to make a full public disclosure on. No official of the sugar company was available for comment yesterday but Stabroek News was told that a full statement will be issued today. The main opposition party has in the past year strongly criticized the company and the government over their handling of the sugar industry.
The PNCR said that it was astonished at a newspaper report on December 3 that a probe team convened by Agriculture Minister, Robert Persaud, to look into the East Demerara Estates, found neglect at those estates. It said that it believes that this mismanagement is a hallmark of all GuySuCo’s sugar estates and not just the ones in East Demerara and pointed out that in the 2007 Strategic Plan, it was clearly stated that the capital budget for 2008 (the first year in which the strategic plan becomes operational) should address certain problems in the various estates with a view to correcting them.
“In keeping with this new strategic plan, the estates submitted their capital budgets for 2008, totalling G$5.6 billion, but the amount allocated was slashed to G$2.43 billion. This represented a 50% reduction of the capital budgeted by the GuySuCo estates. This drastic slashing of the capital budget is a clear indication that GuySuCo is in a serious economic crisis. All of the estates are in trouble and not just the East Demerara Estates. The Government should, therefore, stop misleading the Guyanese people about GuySuCo’s current predicament”, the party declared.
It quoted the company’s executives as stating in a summary that “The consequence of this decision (on top of the cancellation of G$500M of the 2007 capital expenditure to fund wage increases and G$1.0 billion reduction in 2006 for similar purposes) is that plant and equipment reliability will be compromised and consequently the risk of not being able to process crops in the correct time frame will increase”.
It noted that the GuySuCo summary reports; “The reduction of the G$5.6 billion planned expenditure to below half of this quantity will significantly restrict management’s ability to achieve the objectives outlined within the strategic plan in particular with reference to the Factory Incentive Production but now probably the Annual Incentive Production as well.”
The PNCR said that some of the cuts at the estates are incredibly high pointing to Albion, whose capital requirement was stated as G$543.635M and which was slashed to G$195.84M.
Yields
It stated that cane yields were extremely disappointing and noted that a GuySuCo investigation has discovered that difficult weather and the shortage of labour, during cropping time, has forced the industry to reap canes too close to the onset of the rainy seasons and consequently, the re-growth of the ratoons were adversely affected by the rainfall, contributing significantly to this year’s poor yields.
Delays in the availability of fertilizer and the ineffective application of other agro-chemicals are a major factor responsible for the loss of productivity; the party said, adding that the sugar company no longer imports its own fertilizer. It stated that the corporation has contracted out the supply of fertilizers to selected contractors and alleged that, supplies through those contractors are unreliable and often unpredictable.
As a consequence, the party said, supplies of fertilizers and other agrochemicals, to GuySuCo, have become a major negative influence on their productivity. The statement said that the GuySuCo Report states “the recent fertilizer price increases are obviously of great concern. Whilst similar large increases have been experienced by some Caribbean countries, e.g. Jamaica, others do not appear to have large increases over the past year, e.g. Belize and Barbados.
This calls into question the pricing used by current suppliers in Guyana.” The PNCR statement observed that the sugar company requires around G$2.4 billion dollars worth of fertilizer annually and urged the company to import their own fertilizers and other agro-chemicals to avoid late deliveries and “highly exploitative prices from the contracted suppliers.”
Meantime, the PNCR said, the long time lag, between the burning and the delivery of cane to the factories is becoming a cause for great concern, since it leads to a serious deterioration in the quality of the juice. Additionally, the time periods when grinding is not done, as a result of the unavailability of cane, remains unacceptably high on most estates. This is yet another cause of the deterioration in the quality of the juice, which contributes to lower sugar yields, since it is taking more tons of cane to make a ton of sugar, the party declared.
Skeldon factory
As regards the New Skeldon Factory, it asserted that it is a cause for much concern and should be the subject of a major bipartisan national inquiry.
The statement noted that approximately 7000 tons of cane was crushed in October, producing 224 tons of sugar and said that the factory has not been able to produce at its rated capacity of 350 tons of cane per hour and is struggling to operate continuously at a reduced production rate of 140 tons of cane per hour. The statement added that several mechanical defects are yet to be corrected including diffuser operation, shredder replacement bearings and automation of the process.
“It is not possible to harvest all of Skeldon’s cane even if the estate operates to the end of December 2008, and a significant amount of the cane would have to remain in the field to be carried over to 2009”, the party declared. It added that the quality of the Skeldon canes continues to be poor due to inadequate drainage and as a result, the percentage of sugar in the cane is reduced. The PNCR noted too that the old Skeldon factory was brought back into production but had not functioned well with the extraction being the lowest in the industry at 89.5%. It pointed out that Albion was 93% and GuySuCo is forced to transport cane produced at Skeldon to the Albion factory.
On energy generation, the party declared that the high use of diesel fuel generators at all locations, during the crop continues to be an area of high cost for all factories and noted that the factories are not grinding continuously to generate enough bagasse to fuel the generators, even during the crop.
On the issue of production, the PNCR said that as of November 10, GuySuCo produced 218,880 tons, when its expected production was 268,173 tons and consequently the company is 49,293 tons behind its production estimate. There are some significant problems with the Skeldon estate, the party said noting that that estate was supposed to have produced 38,599 tons by the middle of November but only produced 16,009 tons and out of an industry wide shortfall of 49,293 tons, Skeldon accounted for nearly half. It added that Albion was supposed to have produced 58,084 tons by the middle of November but produced 51,470 tons, which is nearly 7000 tons less than estimated. The party declared that there are no problems in the East Demerara Estates that could possibly compare with the disastrous situation in Berbice and production for the month of October for the entire Industry only yielded 30,374 tons against an estimate of 43,086 tons. It said that four estates, Uitvlugt, Wales, Enmore and Blairmont closed their crops at significantly lower yields than estimated and ceased their grinding operations during the first week of November.
With all of these problems, GuySuCo now estimates that the 2008 total sugar production will only be around 236,000 tons, and if this is true it would be the poorest annual production since 1991, the party declared.
Labour
The PNCR stated that GuySuCo’s problems arise from a shortage of labour on most estates to do the harvesting and husbandry work necessary to remain competitive.”For example, in the 6 year period immediately prior to the GuySuCo 1998 strategic plan being implemented in full, 1994-1999, the industry made a total before tax profit of G$19.361 billion dollars, whereas, in the six year period after that, 2001-2006, they made a loss of G$6.577 billion! The main reason, which our investigations uncovered, was that the labour cost, which was 42.72% of the price of all sugar exported, during the period 1994 to 1999, and rose to 64.9% of all sugar exported, between 2001 to 2006”, the party declared.
It declared that the irony of the situation is, because of a total misunderstanding of the dynamics of the sugar industry, the GuySuCo Board agreed to reduce the workforce from 28,000 to 18,000 without understanding the consequences of their actions and this has led to a major shortage in labour. The statement added that the reduction in the workforce did not decrease the wage bill but doubled it and in the six year period, 1994-1999, the total wage bill for the Corporation was G$50.04 billion while in the 2001-2006 period the wage bill was G$90.698 billion.
It pointed out too that the total earnings of all sugar exported during the period, 1994-1999 was G$809.6 billion and, in the period 2001-2006, it dropped to G$715.9 billion. So, while the price of labour almost doubled, during the period 1994 to 2006, the total earnings of the industry fell by an average of 11.6%, the PNCR commented. It added that as a result, since most field operations are no longer being performed on time, the entire industry is in crisis and further noted that since 21% of the Preferential Price will be removed, in September 2009, it would prove increasingly difficult, if not impossible, to salvage the sugar industry.
