Big bill to implement sugar industry recommendations

KINGSTON, Jamaica, Thursday March 31, 2011 – A total of $100 million is to be spent on the implementation of the recommendations of the Sugar Industry Commission of Enquiry, which have been approved by Cabinet.

The process will be spearheaded by the Sugar Transformation Unit in the Ministry of Agriculture and Fisheries, and is expected to be undertaken from 2011 to 2014, with funding from the European Union Accompanying Measures programme.

The Commission was set up last year to look into and reported on the relevance of the current institutional, regulatory and pricing arrangements in the sugar industry.

Minister of Agriculture and Fisheries, Hon Dr. Christopher Tufton, said the enquiry was necessary, based on critical issues including the privatisation of Government holdings.

“The government took a decision…to move in a direction that would see, ultimately, a fully privatised cane industry, and an industry that was not just based on the production of sugar…but on a range of products,” he said.

“We are moving towards a privatised industry that is self-sustaining and, as a consequence, a number of changes had to take place.”

He noted that the industry had to be adjusted, in keeping with the renunciation of the European Union’s sugar protocol in 2009 which, essentially, no longer grants guaranteed access to its market, nor a guaranteed price.

“So now we were operating within a framework, where we have to compete in order to be sustainable, and it was important for us to look at the new dispensation and adjust towards that,” Dr. Tufton said.

He pointed out that there are multiple products from the industry that need to be looked at, including energy co-generation, molasses for rum and refined sugar.

Among the recommendations approved, is for the Sugar Industry Authority (SIA) to remain the regulator of the industry. The entity is, however, to undergo an organizational audit to establish optimal manning levels.

Regulation of the industry continues to be necessary to resolve differences between cane farmers on the one hand, manufacturers on the other or any other stakeholder groups within the industry, and to oversee cane payment to farmers, he said.

Dr. Tufton noted that the Terms of Reference for the review are now being developed, with a view to contract out this work very shortly. 

The Commissioners also recommended the retention of the Sugar Industry Research Institute (SIRI), to provide research services to the industry. The Minister said it was, however, recommended that SIRI be also subjected to an organizational audit, to establish optimal manning levels and establish the relevant synergies with the Rural Agricultural Development Authority (RADA).

Another recommendation was the retention of an agency relationship between the SIA and the Jamaica Cane Product Sales (JCPS).  However, the terms of this engagement will also be subject to review. 

Cabinet has approved the recommendation of the Commission to review the Sugar Industry Control Act, to determine appropriate amendments consistent with the new configuration and realities of the industry. Terms of Reference for a Legal expert to undertake the review are being developed. Also approved is the commissioning of a task force, involving the ministries of agriculture and fisheries, and transport and works, the Port Authority of Jamaica and sugar stakeholders, to develop a plan for an alternative port facility for expanded sugar exports.

The Commission examined the issue of centralised importation of refined sugar, which the Minister said is somewhat controversial, with some advocating for the continued liberalization of imports and some advocating for centralisation.

“It was the view of the Commission of Enquiry that centralisation not be entertained, as any gains from this activity accruing to the industry constitutes a tax on consumers,” Dr. Tufton said.

Consistent with the recommendations of the Commission, Cabinet mandated that the SIA immediately initiate a review of the cane payment formulae and process, and for the Office of Utilities Regulation (OUR) to review its avoided cost methodology (ACM) for pricing co-generated electricity to incorporate the actual fuels used to generate electricity in Jamaica.

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