Under-Invoicing of Insurance Premium & Manipulation of Total Insurable Sugar at SIFB
The uncovering of the case at the SIFB vindicates our demand for full-fledged investigations as we evaluate the diversion of small planter’s income over the last 20 years to the tune of some Rs30 bn
By Pradeep Jeeha
The PNQ of the Leader of the Opposition in Parliament on Wednesday 21 November 2018 vindicates what the small cane growers have been saying for the last six months.
The small cane growers have been crying on rooftops to denounce how they are being fleeced with the tacit complicity of the Mauritius Sugar Syndicate (MSS), the Mauritius Cane Industry Authority (MCIA) and the Government. The PNQ has shed light on two important issues:
The under-invoicing of insurance premium payable by corporate planters; and
The manipulation of Total Insurable Sugar (TIS) at the level of the Sugar Insurance Fund Board (SIFB) in order to contain the loss in sugar output below the legal threshold of 17% with the final objective being not to declare an event year and not to pay insurance compensation to cane planters.
Under Invoicing of Insurance Premiums to Corporate Planters
According to the leaked document signed by Mr J.Sookdeb – the SIFB has allegedly under-invoiced an amount of Rs 1,452,405. /= to ONE corporate planter, which forms part of the ENL Group. The company should have paid Rs 1,600,155 as insurance premiums but it paid only Rs147,750 because the SIFB has wrongly undervalued its Total Insurable Sugar (TIS) at 257.604 MT or at 10% of its actual sugar production of 2576.04 MT (78% planters share). As a result the Millers Medine & Omnicane also underpaid Rs 279,797 as insurance premium to the SIFB (on the corresponding 22% millers share). The total under-invoicing based on this sole planters account amounts to Rs 1,732,202.
One can rightly question how many corporate planters have over the years benefited from the generosity of the SIFB and what is the total loss suffered by the SIFB in insurance premiums receivable on account of such shortcomings? The crop synopsis 2017 proves that the SIFB’s system is not foolproof after all. What must also be noted is that corporate planters pay a lower rate of insurance per ton of sugar – i.e. Rs 621 MTs in the case of Cie Sucriere de Bel Ombre Ltd whereas some small planters are having to pay up to Rs 2,000 MTs as insurance premium based on their rankings & TIS which are once again subject to manipulation. This what you call fleecing the poor to feed the rich.
Manipulation of Total Insurable Sugar (TIS)
According to Mr Sookdeb’s paper, the SIFB has allegedly deliberately changed the parameters, the bases and the methods of calculating the TIS of all factory areas so as to keep the fall in TIS below 17% – the threshold required to trigger the declaration of an event year and therefore to pay compensation to planters for loss of revenue. If the averments of Mr Sookdeb are proven to be correct, then if an event year is declared for 2017 an amount of Rs 450m becomes payable as compensation to all planters in the factory areas of Medine, Omnicane and Alteo ( 269, 260 Mts x 17% x Rs 10,000 Mts).
The first irony of this queer situation is that small planters will not even receive Rs 45m as compensation because of their lower compensation rate which is tributary to the yield gap impacting upon their ranking. The lion share of the compensation (Rs 405m) will once again go to the corporate planters or the sugar barons. The fight started in the name of the small planter will once again benefit the sugar barons only.
The second irony is that Government through a lunatic at the Ministry of Finance has already sanctioned a financial assistance of Rs 447m out of SIFB reserves to all planters and millers for the 2017 crop as shown in the table below. Additionally in 2018 the sugar barons have already received Rs 1bn from government as pointed out in my article ‘Jackpot for the sugar barons…’
It can be clearly seen from the table that Rs 5.3bn of SIFB reserves have already been swallowed by the sugar barons and that if this trend continues the SIFB will become insolvent very soon.
Finance Act 2018
Coming back to the 17% threshold required to trigger the payment of compensation in an event year, the Finance act 2018 voted by parliament in July this year has increased this threshold to 20% by a stroke of the pen. No provision has been made for positive discrimination in favour of small planters. To worsen matters further, planters who have not harvested their canes for 2018 will not be entitled to a compensation or financial assistance.
Planter’s classification is no longer based on the sugar produced but on the Area under Cane cultivation (AUC). Any planter who cultivates cane on more than 300 hectares is now considered as a large planter. All small cane growers, metayers and other planters with less than 300 ha are considered as “growing units”. Government owes us an explanation as to the real motivations behind these amendments.
Where does this mess leave the small planters?
On 4th November 2018 the small cane growers and metayers met at the Octave WieheAuditorium, precisely to ask Government to establish/legislate for a Statutory Fair and Remunerative Price (FRP) of Rs 2,500 per ton of cane payable to all cane planters because cane as opposed to sugar is highly profitable. The small planter no longer trusts the MCIA, the MSS, the SIFB and the Government as far as extraction rates, sugar output, payment to planters and policies are concerned. The small planter is further not interested in all the intricacies involved in sugar extraction, richesse, molasses extraction, refining fee payment and so on. Small planters receive Rs 3,800 per ton cane in India and RS 3,500 per to cane in Reunion island, and even more than that in Martinique.
The small planters also asked for the setting up of a financial investigation into the finances of the MSS and the MCIA. The uncovering of the case at the SIFB vindicates our demand for full-fledged investigations by financial experts as we evaluate the diversion of small planter’s income over the last 20 years to the tune of some Rs30 bn. Those responsible must refund this amount to the 30,000 small planters.
All the foregoing is certainly not music to the ears of the sugar oligarchy and the political oligarchy. The countdown to polling day of 2019 has already begun. Small planters and metayers are very proud, law-abiding citizens, but they will definitely vote with their feet to end this “cholocracy” when the time comes.