Sugar industry was doomed to fail

By Raffique Shah
Submitted: July 26, 2016
Published: August 01, 2016

Raffique ShahTrinidad & Tobago, as a very inefficient producer of sugar, relying heavily on preferential, prices for the commodity from Britain, and later the European Union, should have scaled back sugar production from the 1970s when the industry’s losses mounted year after year, soon to reach uncontrollable levels.

A better option would have been to focus on food production, both large, mechanised farms and smaller, family farms, even if it meant government having to lend support through subsidies and/or incentives: most successful food producers, even developed countries, do that.

But no government wanted to be accused of targeting Indians, who formed approximately 90 percent of the 9,000-strong workforce and the 6,000-odd independent cane farmers who cultivated and sold their produce to Caroni Ltd.

In 1970, when Government acquired 51 percent of Caroni from the British manufacturing giant Tate & Lyle (which retained 49 percent and continued to manage the company), Caroni incurred a loss of $4.6 million. By 1975, when Government bought out Tate & Lyle’s shares, losses had spiralled exponentially, with the State having to inject hundreds of millions of dollars by way of loans and subventions.

Why? Many people might ask: after all, sugar was still profitable in Guyana, St Kitts and Jamaica, and even more so in Brazil, India, Australia and many African countries.

The answers to that question are complex. At the core, in my view, was the reality that T&T was an oil-based economy, and when the first oil boom of the mid-1970s sent salaries spiralling, those who laboured in very harsh conditions in the sugar industry could not be left behind. Their unions battled and won for both workers and farmers significant increases in 1975.

However, productivity did not improve: in fact, it went into the opposite direction. Yields per acre dropped drastically, from 30-plus tonnes to below 20. Pests like froghoppers ravaged the fields. The use of herbicides and insecticides became universal, with all their negatives. Poorer cane quality resulted in the conversion of cane to sugar (tc/ts) to rise from eight to as high as 13. Wild fires were rampant, further affecting cane quality.

By 1992, Caroni had accumulated debts amounting to approximately $2 billion. Patrick Manning as Prime Minister decided to act decisively. He appointed a Tripartite Committee (unions, management and UWI experts) to formulate strategies to save Caroni as a diversified agricultural enterprise.

In the 1980s, the company had already ventured into rice, citrus and livestock, none of which had proved to be profitable. Also, several other experts had examined the company and made recommendations to turn it around: John Spence (1978); Frank Rampersad (1980); Eric St Cyr (1984); and Lloyd Rankine (1991).

Based on the Tripartite Committee’s report, the Manning Government wrote off Caroni’s $2 billion debt, giving the company a new, debt-free start.

Here’s what happened: Caroni incurred annual operating losses of $175 million in 1996, $246 million in 1997, $305 million in 1998, $223 million in 1999, $349 million in 2000 and $367 million in 2001.

Government’s support (subventions/loan guarantees): 1996-$349 million; 1997-$124; 1998-$190; 1999-$808; 2000-$388; 2001-$188; and 2002-$579.

Caroni’s cost of producing raw sugar, compared with selected countries in 1995 (it will have grown worse afterwards), in US cents per pound: T&T-25; Barbados-40; Guyana-15; Jamaica-20; Australia-9.6; Fiji-12.

So, by the turn of the Century, Caroni was going nowhere very quickly, or maybe more aptly, the cry from the plantation was “backward ever, forward never”.

Some people swear it was worth saving for its foreign exchange earnings. Let me deal with that one time, as my brethren would say: in 1996, a pretty good year, it earned US $40 million. At an exchange rate of 6.3, the equivalent in TTD will have been $252 million. But in spite of that, Caroni’s loss was $175 million and government support was $349 million. You figure out what those 40 million US dollars really cost us!

Caroni was on an irreversible slide, and not even the key stakeholders could muster the will to save it. From management to cane cutters, labourers to cane farmers, the feeling was once the oil dollars flowed they would be paid. And if Government wanted to turn off the tap, it would pay big bucks in severance packages-which it did.

I lament its demise because I felt it could have been transformed into the biggest food-producing entity in the region, using the same oil dollars to put it on a firm footing.

I share the sentiment too that State-funded entities such as URP and CEPEP should be either made productive or shut down the way Caroni was. Ditto for Caribbean Airlines, which has long been a burden too heavy to bear.

The sugar workers and cane farmers have survived Caroni’s closure, with many of them thriving in its aftermath. Surely others can, especially those who enjoyed free education and are professionally qualified, and those who acquired skills.

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