What is the solution to the Pakistani Sugar Crisis ?
Some Basic Facts
The Sugar Mills make money at the highest capacity,and the lowest material cost.For that,there haas to be over-production of cane - and farmers have to be pampered and brainwashed,to get the "best" cane prices.High cane prices, are of no impact for the mill,as the cabe price,is a defacto pass through,to the state. dindooohindoo
In other words,the excess sugar produced,from the excess cane produced - will HAVE TO BE exported - with the subsidy and the drawback,at the cost of the state.In addition,the cane payments are made from working capital loans from banks - and the loans would be liquidated from the export and domestic sale proceeds - and so, the NSR from exports and domestic sales has to be profitable.Otherwise,the mill is bust and the bank loan,is an NPA,and millions of cane growers have no buyer.
Solution 1
The state has to rework the subsidy.The mills have availed of the advantage of the maximum capacity utilisation, arising out of a bumper cane crop.Hence,the cost of the export stock,should be computed based on the "Marginal cost of Production and Direct costs", upto sale.The difference of this,w.r.t. the FOB Export rates - should be the subsidy.
whether the mills should get a Profit on the Marginal Cost - is a separate issue - as the economies of scale have already accrued to the mill owner,for the domestic sugar sold.In the alternative,the mills can be paid a service charge,per ton,as they have acted as an NGO - to service the farmers and use their cane,and have in effect transmitted the subsidy,defacto to the farmers.
Solution 2
In the current scenario,there is a time limit for exports - as the working capital bank loans,have to be liquidated - for payments for fresh stock purchases.The precise dates are known to traders and punters,all over the world - as the patterns of behavior of a baboo,in the state - as to,steps to liquidate the stocks - are predictable.
Hence,the mills have to be provided additional unsecured credit,for fresh cane purchases - and a central state agency should sell sugar futures,every quarter,with or without selling options, and give delivery where the futures and the options are out of the money,or where the contango on futures and option premiums,added to the futures price,is closest to the Price to be paid,to the mills
The nation will,at least, get the maximum NSR on Sugar exports - and the subsidy loss,will be minimised.
If the 12 month futures contango or option premium, is in excess of the working capital cost of the stock,the state can hold some of the sugar stock,as the net working capital cost is nil or negative.If the futures and options turn a loss,the state can provide stock delivery.There would be several such combinations.
Solution 3
The farners have to be shifted from cane farming.Instead of giving subsidies to mills,for export stocks - which represent, excess cane production - the subsidies can be given to farmers directly,to shift to other crops.The subs idies can be in the form of free power,seeds, fertilsiers, pesticides,crop insurance,supplements and implements.In addition,value added factories for the new crops,can be set up near the crops - with subsidies.As time passes,the viability of the crops will increase,and the subsidies will be nil
It is possible that the NSR on exports + export subsidy - Marginal cost of Production and sale of export sugar, is more than the financial profit,earned by the cane grower.
In such a case, a subsidy equal to the financial profit, which COULD be earned from the cane sales - can be paid,as a subsidy,to the cane farmer - NOT TO GROW THE CANE.
Each crushing season,the state should calculate the excess stocks expected over 1 year based on demand and current stocks.The current production which will be in excess of the safety and base and emergency stocks - is the likely surplus stock to be exported.
70% of the expected surplus stock - should be transported to state godowns,on a quarterly basis - by the cheapest mode - which is rakes.The state godowns can be near or inside the ports (warehouses),or near or inside the dry ports.
All exports should be made from STATE GODOWNS only. This will make sure that there are no bogus exports,and also,there can be no money laundering.
Solution 5
A locust,is a drone with AI,and a perpetual battery of a few years,and the drone can clone itself.The cane production has to be reduced.The state can use Bio war tools to destroy crops in certain regions and certain strains - and this is surely being done,in many parts of the world.The loss to the farner,is the financial opportunity to the farmer foregone - which has to be compensated by the state.Loss to the sugar mills need not be compensated - but the interest on loans,can be waived - and banks,can be compensated,for the interest loss.
The aggregate compensation to the farmers and mills, will be less than the subsidy and drawbacks on exports,interest and storage cost on export stock,and storage losses of export stock.dindooohindoo
The Solution to the Sugar Corrupti-demic ! Part 1
ReplyDeleteWhat is the solution to the Pakistani Sugar Crisis ?
Some Basic Facts
The Sugar Mills make money at the highest capacity,and the lowest material cost.For that,there haas to be over-production of cane - and farmers have to be pampered and brainwashed,to get the "best" cane prices.High cane prices, are of no impact for the mill,as the cabe price,is a defacto pass through,to the state. dindooohindoo
In other words,the excess sugar produced,from the excess cane produced - will HAVE TO BE exported - with the subsidy and the drawback,at the cost of the state.In addition,the cane payments are made from working capital loans from banks - and the loans would be liquidated from the export and domestic sale proceeds - and so, the NSR from exports and domestic sales has to be profitable.Otherwise,the mill is bust and the bank loan,is an NPA,and millions of cane growers have no buyer.
Solution 1
The state has to rework the subsidy.The mills have availed of the advantage of the maximum capacity utilisation, arising out of a bumper cane crop.Hence,the cost of the export stock,should be computed based on the "Marginal cost of Production and Direct costs", upto sale.The difference of this,w.r.t. the FOB Export rates - should be the subsidy.
whether the mills should get a Profit on the Marginal Cost - is a separate issue - as the economies of scale have already accrued to the mill owner,for the domestic sugar sold.In the alternative,the mills can be paid a service charge,per ton,as they have acted as an NGO - to service the farmers and use their cane,and have in effect transmitted the subsidy,defacto to the farmers.
Solution 2
In the current scenario,there is a time limit for exports - as the working capital bank loans,have to be liquidated - for payments for fresh stock purchases.The precise dates are known to traders and punters,all over the world - as the patterns of behavior of a baboo,in the state - as to,steps to liquidate the stocks - are predictable.
Hence,the mills have to be provided additional unsecured credit,for fresh cane purchases - and a central state agency should sell sugar futures,every quarter,with or without selling options, and give delivery where the futures and the options are out of the money,or where the contango on futures and option premiums,added to the futures price,is closest to the Price to be paid,to the mills
The nation will,at least, get the maximum NSR on Sugar exports - and the subsidy loss,will be minimised.
If the 12 month futures contango or option premium, is in excess of the working capital cost of the stock,the state can hold some of the sugar stock,as the net working capital cost is nil or negative.If the futures and options turn a loss,the state can provide stock delivery.There would be several such combinations.
Solution 3
The farners have to be shifted from cane farming.Instead of giving subsidies to mills,for export stocks - which represent, excess cane production - the subsidies can be given to farmers directly,to shift to other crops.The subs idies can be in the form of free power,seeds, fertilsiers, pesticides,crop insurance,supplements and implements.In addition,value added factories for the new crops,can be set up near the crops - with subsidies.As time passes,the viability of the crops will increase,and the subsidies will be nil
It is possible that the NSR on exports + export subsidy - Marginal cost of Production and sale of export sugar, is more than the financial profit,earned by the cane grower.
In such a case, a subsidy equal to the financial profit, which COULD be earned from the cane sales - can be paid,as a subsidy,to the cane farmer - NOT TO GROW THE CANE.
The Solution to the Sugar Crisis - Part 2
ReplyDeleteSolution 4
Each crushing season,the state should calculate the excess stocks expected over 1 year based on demand and current stocks.The current production which will be in excess of the safety and base and emergency stocks - is the likely surplus stock
to be exported.
70% of the expected surplus stock - should be transported to state godowns,on a quarterly basis - by the cheapest mode - which is rakes.The state godowns can be near or inside the ports (warehouses),or near or inside the dry ports.
All exports should be made from STATE GODOWNS only. This will make sure that there are no bogus exports,and also,there can be no money laundering.
Solution 5
A locust,is a drone with AI,and a perpetual battery of a few years,and the drone can clone itself.The cane production has to be reduced.The state can use Bio war tools to destroy crops in certain regions and certain strains - and this is surely being done,in many parts of the world.The loss to the farner,is the financial opportunity to the farmer foregone - which has to be compensated by the state.Loss to the sugar mills need not be compensated - but the interest on loans,can be waived - and banks,can be compensated,for the interest loss.
The aggregate compensation to the farmers and mills, will be less than the subsidy and drawbacks on exports,interest and storage cost on export stock,and storage losses of export stock.dindooohindoo