Protection must be provided to the weak and not to the strong

From Sugar to Cane

The purpose of this paper, written from the perspective of the small planters is to raise awareness about the revenue generation possibilities from cane without having recourse to government subsidies and other tax exemptions. Small planters and Metayers contribute up to 20% (800,000MT canes) of cane produced out of the current 50,000 ha (1990: 76,000ha); yet they have historically been deprived from receiving their fair share of returns from cane. It is also a message for the corporate sugar sector to shoulder its responsibilities and to stop crying wolf. Never was the saying that “we are all on the same boat” as true as it is today.

Since the beginning of the sugar sector reforms, nearly €1 billion has been obtained from the EU, in the form of direct budgetary support, funding of Voluntary Retirement Schemes-VRS 1 and VRS 2, regrouping and de-rocking schemes, centralisation of sugar milling activities, and investment in refineries for White Refined Sugar (WRS), Special Sugars (SS) and ethanol.

Many small planters are abandoning their plantations on economic grounds, whereas millers/planters are benefitting from various tax incentives and land conversion schemes aimed at lucrative diversification away from cane and real estate developments targeting foreigners mainly. The amendment of the SIE Act in 2016 created a new market for Land Conversion Rights whereby for every acre of land given to the State the Corporate Sugar Sector will benefit from tax exempt conversion of 2 acres of land. A glaring example of this scheme is the new road built at the tax payers’ expense to the tune of Rs 650 million on Omnicane land, from Mare d’Albert to the SSR Airport as part of the road decongestion programme – a road which was never required in the first place but which effectively dis-enclaves and adds value to the land belonging to Omnicane/ENL in that area and paves the way to its IRS in the South.

Joint Technical Committee 2018

Government set up a Joint Technical Committee (JTC) in 2017composed of civil servants and the representatives of Business Mauritius (MSPA & JEC) –to define a price mechanism for the use of bagasse for energy generation. Small planters were left out. Government will gain by revisiting the William & Hutton Report (2009) on the subject. The JTC submitted its report on 10 May 2018 after incorporating recommendations from a Restricted Negotiating Committee (RNC) of the corporate sugar estates. The JTC’s recommendation is that Government and taxpayers must foot an annual bill of Rs 1.3 bn in form of subsidies for the next 5 years to 2022 leaving lesser funds to fight poverty and to increase funding for social services/social housing. Later the same people will lament over the level of public indebtedness and budget deficits. Otherwise the JTC is advocating amongst other things to increase consumer electricity bills by Rs 1.10 per kWh and to further increase the price of petroleum products by Rs0.30 cents per litre.

It is high time for policy makers to stop this piecemeal approach to solving the problems of the sugar industry. Apart from foregoing significant income from transactions involving land and immovable properties Government has been dishing out huge subsidies on a recurrent basis either from public funds, the SIFB reserves or out the pocket of the consumers to please the millers/corporate planters who are like peas in a pod. Since independence the Corporate Sugar sector has been crying wolf to obtain more Government subsidies funded with taxpayers’ money. But they have also invested in Africa (Kenya, Mozambique, Tanzania etc…) without any such favours from the African States. Protection must be provided to the weak and not to the strong. Unnecessary subsidies encourage inefficiency and wastage of resources which thereafter create disequilibrium in the economy and enlarge the debt trap. The small planters and metayers do not need subsidy. They need their fair share of revenue from cane which is still abundant despite the near death of sugar.

The focus must henceforth shift from sugar to cane and its by-products. The small planters must get their fair share of income from cane delivered to the miller. The average ex syndicate price to the small planter must include a premium for refined and special sugars which has so far been denied to them. It is no secret that cane by-products also provide sizeable revenue for everyone including the small planters.

The Cane Industry has to be revamped and re-engineered into a really strong win-win partnership not influenced by opposition from powerful vested interests. There are no magic solutions. We have to increase revenue streams and reduce avoidable costs. While the sale of sugar has been regulated by the MSS Act since 1951, the sale and commercialisation of other cane by-products have completely been left out to the millers and the corporate Sugar sector by the British well before Independence in 1968. And no post-independence Government has dared to review this unhealthy state of affairs to this date.


In his book “Alternative Uses of Sugar Cane and Its By-Products In Agro Industries”(1989), J.M. Paturau advocated the optimal use of cane by-products to provide non-negligible support to the cane industry. These by-products are bagasse, molasses and filter muds. If we go by the yardstick provided by him the Mauritian scenario in 2018 will look like below:

Each of the above has an economic value of its own. Starting with bagasse it is sad to note that small planters are not paid on the weight of bagasse produced but rather on the basis of tonnage of sugar accrued to the planter which is dependent on the sugar extraction rate of the miller. The best thing would be to remunerate bagasse on its actual weight which is internationally proven to be a third of the cane tonnage provided to the miller. So a planter producing 30 tons of canes, must be entitled to 10 tons of bagasse income. Bagasse and molasses are produced at zero cost to the miller.

The price of bagasse used for purposes other than the manufacture of sugar (production of electricity, feedstock and flower) was fixed at Rs 100 (US$3.30) Mt sugar under the Bagasse to Energy programme (BEP-1985) and remained stagnant for 30 years although electricity production from bagasse increased significantly. Only recently it has been increased to Rs 149/Mt sugar. The payment is made out of CEB funds on surplus bagasse only.

In simple language, this means that out of 10 tons of bagasse produced per acre, the miller uses 7 tons of bagasse free of cost. The planter is at most compensated only for the remaining 3 tons of bagasse. This gross anomaly has to be addressed and corrected forthwith if we want to achieve meaningful collaboration.

According to experts, cane tops/trash and bagasse have the same calorific value for electricity production. Some IPPs in the north are proposing Rs 1,200/ton of cane tops collected from planter’s fields. The JTC evaluates cane trash at Rs 1,000 per ton. On this basis it is only fair to require Millers and IPPs to pay at least Rs 1,500/ ton of bagasse to the planters providing them an instant income of Rs 15,000 per acre instead of the actual Rs 450 per acre. This measure will also incentivise those who have abandoned their lands to come back to the cane industry. If bagasse fulfils the function of a public good it must be fairly remunerated. Millers/IPPs should no longer be allowed to utilise bagasse free of charge to produce electricity, liquid fertilisers, biofuels and rum.

The MCIA must make it mandatory for millers to disclose on a quarterly basis the proportion of bagasse utilised in sugar production, electricity generation and biofuels production, because these by-products undergo the same basic processes. More than 50% of the bagasse utilised by millers free of cost produce electricity that is sold to the CEB. The ratio of power to steam generation from bagasse can be safely estimated to be in the range of 75:25.

In 1995, Government established the Bagasse Transfer Price Fund (BPTF) financed by the CEB to the tune of Rs 60m annually for 600,000 tons of bagasse (Rs 100/ ton) – a fund initially devised for small planters only. But more than 62% (50:38:12) of the BPTF is now paid back to the millers, corporate planters and IPPs who are already paid in full for energy sold to CEB. In 2015 Government created the Sugar Cane Sustainability Fund (SCSF) managed by the MCIA and paid out again by the CEB (1.08% of the CEB’s revenue) to support all planters for remaining in cane cultivation. This kind of subsidy cannot be perpetuated over time.


Let us now turn to molasses-the residue of processed cane syrup (masse cuite) from which no more sucrose can be extracted. Its yield is approximately3.0%-3.3% of the cane tonnage i.e. 30 kg of molasses are obtained per ton of cane. It is utilised to produce alcohol, rum, vinegar and citric acid. As a by-product molasses have absolutely no cost of production and its production cannot be increased in response to increase in demand unless it is deliberately increased to the detriment of sugar. In 2017, planters were paid Rs2, 242 per ton (US$ 64 per ton) of molasses when the world price (OECD library) was US$ 195 or Rs 6,825 per ton.

A private company owned by the millers and corporate planters — Alcohol & Molasses Export Ltd (AMEL) – exports 30,000 tons of molasses for Rs 8,510 per ton (as per 2017 financial statement of AMEL) whereas it buys the same at Rs1,900/. The SIE Act 2016 now provides a statutory protection to AMEL & Omnicane by introducing a method of keeping molasses prices below world market prices with a floor of Rs 2,000. and a cap of Rs 3,500 per ton using the Rotterdam LEI FOB price as reference. We can only wonder as to who is being protected by keeping the prices of molasses so low and how can a Government incorporate such a formula in a piece of legislation. Why are we depriving small planters from receiving at least Rs6,800./Ton of molasses?

Actual molasses production (2016) is 130,000 MT out of which 30,000 MT is delivered by the miller to AMEL for export and 65,000 MT is sold to Omnicane for production and export of ethanol. The remaining 35,000MT is sold to Distillers & Bottlers for rum production who in return pay the small planters a contribution only Rs 498/ton sugar. The purchase price is only Rs 1,900/ton molasses. Apart from citric acid, rum production from molasses is considered to be the most profitable business from cane with a ton of molasses producing some 230 litre of rum at least (per JM Paturau). Considering the actual retail price of Rs478.50 per litre of rum on the local market, one ton of molasses is worth Rs110, 000./ inclusive of excise duties and corporate profits.

Manipulation of Molasses Extraction

Another area that needs attention is the extraction of molasses from cane especially for the production of ethanol. Internationally one ton of cane produces 30 kg. of molasses after sugar extraction. In Mauritius Omnicane is the only mill that is extracting 37 kg of Molasses (2017 harvest) per ton of cane without being bothered, while all the three other mills are extracting 30-32 kg.. This is also the only mill where filter muds output is negligible and nobody cares for the loss of income of the small planters. Manipulation of sucrose and molasses extraction is not being thoroughly controlled at this mill. Omnicane owns the only bioethanol plant in Mauritius. It requires 60,000 MT of molasses to produce ethanol at optimum capacity. Extraction of more molasses can only be done at the expense of reducing sugar extraction by skilful equipment manipulation. The cane planter cannot lose Rs 11,/kg raw sugar to obtain Rs 2.24. / per additional kilo of molasses. An increase in molasses production to the detriment of sugar cannot be beneficial to anybody except Omnicane.

When we realise that Government has nearly abolished the CESS and has taken upon itself the financing of service providing institutions (FSC, MSIRI, MCIA) to the tune of Rs 250m annually , we can only expect more rigorous control on fibre, molasses and sugar extraction in all sugar mills unless there is collusion somewhere in the regulatory process. Due consideration must also be given to the rise in fibre content from 13.60% in the 1970’s to 17% now. Increase in fibre can only be obtained at the cost of lower sugar extraction. No wonder the sugar extraction rate has fallen from 12.86% in the 1956 to about 9.56% in 2017.


Maximisation of opportunities should also incorporate the sharing of income from the sale of Ethanol from molasses and liquid fertilisers from Vinasse. It is internationally recognised that 250 litres of ethanol are produced from every ton of molasses. In December 2016 Government legislated for the mandatory blending of ethanol with Mogas but it has yet to decide whether to promote E10 or E5. Despite its announcement in December 2016 Government has yet to formulate the “Ethanol and Molasses Framework”, the “Renewable Sugar Cane Industry Based Biomass Framework” and the “Sugar Based Agro -Industry Framework” which were entrusted to the MCIA. One can wonder why the Utilities Regulatory Authority (URA) and the Mauritius Renewable Energy Authority-(MARENA) have been left out of the formulation of these frameworks and the determination of Cane Biomass tariffs and biofuel (E10 or E5).

Vinasse & Liquid Fertilsier

Distillation of molasses creates a by-product called VINASSE (concentrated molasses at the rate of at least 13 litres per litre of ethanol. This by-product is mixed with granular fertilisers to produce liquid fertilisers utilised solely by the Corporate Sugar sector thereby reducing their cane production cost. If this saving is shared with other cane planters they can also reduce their costs and be encouraged to come back to cane cultivation.


The JTC and the MCIA have guesstimated a viable income to a small cane planter to be Rs 17,000/ton sugar. The main flaw of this argument is that sugar can no longer be used as a yardstick to determine planters’ revenue. In 2017 we were exporting our sugar at RS 11,300 net per ton (Rs 11 per kg). But our local consumers are having to pay for imported sugar at Rs 36,000 per ton (Rs36 per kg). Sugar imported for uses other than refining is being charged with a custom duty of 15% presently, but the JTC is proposing to increase this to 100%.Why is the price of sugar kept artificially high on the local market? How will Government implement its “Sugar Based Agro-Industry Framework” with an import duty of 100%?

The reform of the sugar industry, the centralisation process and the investment in refining capacity facilitated the production and sale of WRS ready for consumption and for Special Sugars. This was supposed to reduce costs and to bring more revenue to the planters than from the sale of raw sugar but the sale of the WRS has failed to generate the additional revenue initially forecasted. Small planters are still being paid on raw sugar basis (Rs 11,300/Mt sugar) and have not benefited from the value addition/ premium resulting from the sale of WRS and special sugars.

Special sugars are 40% to 85% more remunerative than WRS. The accounts of the MSS (2014-2015) reveal that WRS sells at Rs 13,642/ton whereas special sugars fetches Rs24, 986/ton. It is reported that the revenue of special sugars will exceed Rs 30,000/ton for the 2017 crop. The additional income from WRS Rs4,400/ ton sugar is paid to the millers directly over and above the cost of cane processing under the age-old sugar apportionment ratio of 78/22, which amounts to about Rs 3,300 per ton sugar. The processing cost and refining cost to the cane grower is Rs 7,700 or USD 220/ton sugar when the world sugar price of WRS is USD 346/ton (OECD library).

A close look at the accounts of the MSS will confirm the aforesaid. The MSS paid Rs1.3bn (see table 2) to refiners for the 2016 crop. It is unacceptable thats mall cane growers continue to bear additional refinery cost given that the capital expenditure on the same have been fully recovered by 2015.The 78/22 apportionment ratio was further in force (year 2000) when the country had more than 14 sugar mills. The centralisation of milling factories into only 4 units coupled with the reduction in labour force have led to economies of scale and cost reduction which in itself should have triggered revision of the rate to 80/20 at least. But this has not been done once again to the detriment of the small cane growers. We can therefore safely ask as to who is the real risk taker in this industry.

Small planters are being made to pay for the hidden costs of refinery and special sugars, which impacts their income adversely. They are bearing all the risks and losses whereas corporate planters/millers reap all the rewards and perks at zero risk. The smaller the planter the greater the suffering. The international price of WRS is not expected to be above US$ 350 per ton up to 2026 (OECD library). No wonder that small planters are dying a slow death. With hindsight we can question the very strategy of investing into refineries for WRS.

This being said it is time to have an open book policy in the milling and refinery operations. Nobody not even government knows what is the exact cost of producing a ton of sugar or the cost per kWh of electricity generated by the IPPs out of bagasse and this despite the existence of so many regulators.

Full absorption costing is being utilised by the millers/refiners/IPPs in their claims to the MSS and the CEB whereas the production system is vertically integrated and runs on an incremental/marginal cost basis. Therefore there is plenty of room to provide for adequate income to all planters.

Equity participation in cane clusters

Since we are speaking of the cane industry Government must forcefully implement the December 2007 agreement between itself and the MSPA to grant 35% equity participation directly to the planters and workers community in the whole cane cluster and it has to reactivate the “Cane Democratisation fund” set up for this purpose. The agreement also covered the allocation of 2,000 acres of land to Government for social housing and food security out of which nearly 1,000 acres have still not been vested into the state.

Electricity Cogeneration & Electricity Tariffs

According to J.M. Paturau (1989), 450 kWh electricity can be produced per ton of mill-run bagasse. With technological progress over the years some 550-600kWh of electricity can now be produced per ton of mill-run bagasse and at a much lower cost -with power plants operating around 82 bars and equipped with matching condensing-extraction turbo-alternators. According to Dr K. Deepchand’s paper on “Sugar cane Bagasse Energy Cogeneration – 2005”, from an average of 13 kWh of electricity produced in 1988 per ton of cane, the figure roseto125kWh /ton cane in 2004(at CTBV) with a power plant operating at around 82 bars. By updating these figures we can safely estimate by how many kWh the production has gone up per ton cane since then. Dr K. Deepchand further estimates that some 800 GWh of electricity can be exported to the grid compared to the actual 350 GWh and to the 510 GWh proposed by the JTC.

Way back in 1989 J.M Paturau had already worked out the approximate cost of electricity produced from mill- run bagasse to be approximately US$ cents 6 to 8 per kWh with a bagasse price of US$15/ton. Today despite all the technological progress realised to produce more electricity from a reduced cane output and despite the fact that IPPs are using bagasse free of cost, the IPPs are still billing the CEB up to 8 US$ cents (Rs3.00) per kWh and the JTC is now proposing to bill Rs 6.80(19.40 US$ cents) per kWh. All this has to be paid by the consumers. Had the regulators compared the cogeneration cost of electricity from bagasse with countries like Brazil, India and South Africa they would have certainly known the optimal production cost per kWh, and eventually determine a reasonable tariff per kWh for the benefit of the consumers, the IPPs and the cane growers.This is why there is an urgent need for a proper audit of the actual cost of generation of energy per kWh from bagasse.

Harvesting and Field Management

One of the ways to help the cane growers is to maximise land use through the utilisation of plant and equipment used in harvesting and field maintenance. The various field management and land preparation programmes devised over the decades to alleviate the problems of small cane planters have not yielded the desired results due to the bureaucracy involved in the those schemes (LAMU, FORIP & SPRP). If Government wants small planters to come back to cane cultivation the support institutions have to be more proactive and innovative.The main problem of small planters is harvesting, loading and transportation of cane to the mills. The MCIA and the sugar mills must be able to organise these operations for cane growers falling in every factory area to enable these cane growers also to benefit from economies of scale in field operation. The MCIA should invest in an adequate number of efficient loading equipment that operate on the same basis as the miller/planter in areas where mechanisation is not possible. It is not a big feat to plan this operation given that we are now speaking of only 13,000 small planters/ metayers cultivating some 15,000 ha of land. On the contrary this measure coupled with increased income from bagasse, molasses and electricity may bring some 10,000 ha back under cane cultivation.

Labour & Compensation

The direct labour component of the sugar cane industry has fallen from 45,000 in 2001 to just 7,000 owing to the centralisation of milling operations and mechanisation of most field operations largely funded by the EU and the State.

The success of the sugar industry has mainly been achieved through the endless contribution and sacrifices of labourers and Artisans who back in 1956 were working for a salary of Rs1.40 per day.

No cost cutting scheme can be approved if it goes against the interest and the acquired rights of the sugarcane workers and artisans. The JTC is proposing to reduce labour cost by 40%, to limit the NPF contributions of employers to 6.5% instead of the 10.5% paid by all other employers especially the SMEs who are operating without any protection net. The RNC is also proposing to include labour services to the cane sector on the list of essential services like security, fire, and health which is blatant attempt to curtail the right to strike. The SIE Act 2016 moved bagasse and molasses from the exempt supplies to the ZERO rated supplies- the end result of which would be a saving of 15% on the cost of inputs used by the corporate sector. Now the JTC is also advocating exemption from payment of VAT on land conversion rights for corporate planters.On the other hand the JTC is proposing to increase land conversion tax from Rs 3.5m to Rs 5.5 m / ha to curb land abandonment by other planters. The Corporate Sugar sector has been benefiting from overgenerous fiscal handouts over the years to the detriment of taxpayers. All these benefits have been claimed on the shallow grounds of preserving jobs, protecting the small planters and maintaining the competitiveness of the industry.

The Way Forward

The survival of the Cane Industry is in the interest of one and all because of its socio-economic and environmental impacts on the economy. This is a partnership where all the partners must act in a transparent and equitable manner. It is well known that the strength of a chain is based on the strength of its weakest link. In the cane industry the weakest links are the workers and the small planters. It is also a fact that any organisation cannot be too big not to fall. Therefore this boat cannot go far unless there is a common will to row together and in the same direction. The proposals made above can easily provide an income of nearly Rs 2,000 per ton cane to all cane growers. To summarise therefore the following urgent steps have to be taken:

  1. To set aside the report of the JTC outright.


  1. To implement the 35% Equity Participation agreed in 2007 (not through the SIT) of workers and small cane planters/metayers in the whole cane cluster by reviving the “Cane Democratisation Fund.


  1. To revise the 78/22 apportionment ratio to 80/20. Planters should not be made to pay for the hidden costs of refinery and special sugars, electricity generation, molasses and bioethanol.


  1. To concentrate on the production, marketing and sale of special sugars which is 40%-85% more remunerative than WRS.


  1. To revamp the MSS and review its composition and functioning in order to transform it into the Mauritius Cane Syndicate to cater for the promotion and sale of the Cane and all its by-products.


  1. To fix the bagasse income to its actual weight instead oftons sugar accrued basis. An initial price of Rs 1,500 per ton of bagasse will be a correct beginning provided that the small planter is paid in toto for his bagasse output and not on surplus bagasse only.


  1. The Bagasse Price Transfer Funds must be solely dedicated to the small planters.


  1. Molasses income of planters should be linked to the value added from conversion into rum and ethanol and the planters should also receive a fairer share from the direct export of molasses by Alcohol & Molasses Export Ltd (AMEL)


  1. Small planters must also receive their fair share of income from the sale of WRS actually distributed to millers only.


  1. Small planters must obtain their fair share of income from electricity generated from their bagasse.


  1. Workers’ acquired rights to pay, pensions and other accruing benefits must be protected at all costs including their pension rights and the rights to strike. The recommendations of the JTC to layoff labour and to curtail and the rights of sugar industry workers have to be strongly resisted and set aside.


  1. The appointment of an independent international team of experts (not Landell Mills of Ireland please!!!!!) to review the cane industry in a holistic manner and to ascertain the actual cost of production of Sugar, Ethanol, Electricity and Rum and other cane by products with a view to redistribute incomes generated from the cane Industry on a more transparent, just and equitable basis.

Support institutions and regulators must effectively work in the interest of all the cane growers and not only the corporate sugar segment. The MCIA can start by controlling sugar, molasses and scums extraction countrywide, paying special attention to extraction rates and manipulations. It should also invest in cane loading equipments and facilitate transport of small canegrowers’ cane to the mills on a competitive basis.

* Published in print edition on 8 June 2018

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