Sugar Sector Strategic Plan
Government, fully conscious of the threats and challenges facing the Sugar Industry, decided that a Sugar Sector Strategic Plan be elaborated after consultation with all stakeholders. This task was assigned to the Mauritius Sugar Authority (MSA) which handed over its report end-May.
The Sugar Industry is facing serious difficulties and needs a major urgent rethinking. The erosion of preferential access on our traditional export markets for sugar and the challenges imposed by the trade liberalisation process call for immediate action. The long-term viability of our sugar industry depends on its ability to cut down its cost of production and ensure a selling price for our sugar that would enable it to compete with the least developed country suppliers. Last but not least, the industry cannot and should no longer rely on depreciation of the Rupee.
Reform is therefore imperative. This five-year strategic plan is meant to create the proper environment to enable the industry to rethink its operations thoroughly, ensure its efficiency and viability and win the competitiveness battle.
The reform process implies more centralisation, cost reduction, enhanced productivity, man-power rightsizing, an optimal use of cane sugar resources, well-planned diversification activities, improvement of value added and the creation of new opportunities.
This comprehensive package reconciling the conflicting requirements and views of the stakeholders of the sector will enable the sugar industry to face the formidable challenges ahead. As such, the package should be viewed as a whole and not from a piecemeal perspective.
1.1 For the 2001-5 period a certain number of targets have to be attained, namely:
(i) Ensure that export market commitments are fulfilled.
(ii) Reduce cost of production from 18¢/lb to 14¢/lb. The effort from 14¢/lb to 10-12¢/lb will have to be effected from 2006 to 2008.
(iii) Reduce number of sugar factories from 14 to ideally 7 or 8. Reduce sugar losses at harvest time and in factory processing to a strict minimum.
(iv) Generate as much electricity from renewable sources, in particular bagasse.
(v) Ensure that a substantial proportion of the extent of land that can be totally mechanised is prepared, and that an equivalent proportion of the acreage requiring irrigation is provided with irrigation water. The ultimate objective is to have some 60.000 ha totally prepared for complete mechanisation and some 32.000 ha provided with irrigation water in the context of water efficient systems by 2010.
(vi) Create the enabling environment for dynamic and efficient field operations.
(vii) Effect a substantial reduction of the labour force through socially feasible Voluntary Retirement Schemes and adapt, wherever applicable, relevant labour and pension laws.
(viii) Rationalise Global Cess and make a more productive use thereof.
(ix) Ensure a more efficient and judicious use of land and water resources.
(x) Further democratise the industry, in particular, through the sale of agricultural land.
(xi) Develop R & D so as to be able to fully tap the benefits of the forthcoming quantum leaps in respect of biotechnology, biotics and cane biomass.
2. Production Requirements
2.1 The production target will be revised to 620.000t so as to be in line with a more efficient allocation of land resources.
3. Factory Issues
A. The Sugar Factory
3.1 There should be 7 or 8 factories in 2005. In this regard, the following guidelines should be taken into account in respect of factory closure:
(i) The possibility of having factories producing more than 100.000 t of sugar.
(ii) The best way to optimise the use of bagasse and the proximity to firm power suppliers.
(iii) The cost of factory modernisation and rehabilitation with the low cost option being preferred.
(iv) The extent of spare capacity available, assuming that factories will as far as possible run 7 days a week and up to 150 days.
(v) The social costs of factory closure.
(vi) Transport costs and infrastructure.
(vii) The various corporate relations.
(viii) Factory area delimitation issues.
3.2 The various mill owners should preferably agree between themselves on the schedule of closures and on the practicalities of such closures.
3.3 Factories should preferably run for 7 days a week and for up to 150 days. Practical arrangements will have to be made by the sugar companies. Such arrangements should, inter alia, ensure that the interests of the vulnerable partners are not adversely affected.
3.4 Mill breakdowns should be reduced to the minimum.
B. Special Sugars, Packaging and white sugars
3.5 Potent marketing efforts for the sale of special sugars should be made in markets other than the EU.
3.6 To optimise value added on special sugars, an industry owned and centrally located modern packaging plant should be erected. This plant should provide benefits to all producers.
3.7 Producers of special sugars and the packaging plant should aim towards HACCP (Hazard Analysis Critical Control Point) production norms i.e. zero defect.
3.8 For export purposes, special sugars should always have precedence over white sugars.
C. Desugarisation of Molasses
3.9 A review of the feasibility of a molasses desugarisation project should be carried out in the light of low prices of molasses on the world market and of the new developments on the sugar scene.
D. New Technologies to Improve Recovery and Reduce Steam Use
3.10 The Mauritius Sugar Industry Research Institute (MSIRI) will have to evaluate new technologies geared towards improvement in sugar recovery and energy economy and make appropriate recommendations.
E. Dry Cane Cleaning Plant
3.11 The evaluation of the plant has to be finalised in 2001.
F. Water Usage by Factories
3.12 Cane sugar factories have to take steps to bring down water consumption. The target in 2005 should be 0.6 cubic metres/tonne of cane.
G. Receipt of Cane and Receipt of Sugar
3.13 The cost benefits of the extension of time for cane and sugar receipt should be worked out. Amendments to rules or legislation should be effected well in advance of the 2002 crop.
H. Rhum Agricole
3.14 Rhum Agricole is a high value added product and its production should be encouraged. However, such production should reckon with the sugar export commitments of the country.
A. Coal and Bagasse
4.1 The Ministry of Public Utilities will commission an audit of the electrical energy demand of the country and of existing power production capacity in the light of which the construction of power stations would be programmed. Government would support the establishment of power stations run on bagasse/coal for the generation and sale of electricity subject to satisfactory arrangement made with the Central Electricity Board (CEB) on:
(b) offtake of electrical energy depending on national demand and
(c) proper load management that shall not disadvantage the interests of the CEB.
4.2 It would be desirable to create physical clusters across the island with high electricity and steam consuming industries next to sugar factories producing sugar and exporting electricity.
B. Sharing of Benefits
4.3 The sale of up to 5% of the shares of existing and forthcoming power companies over and above the entitlements of the SIT to planters would further consolidate the commonality of interests of planters and millers.
4.4 The bagasse transfer price of Rs100/tonne for bagasse and for purposes other than the manufacture of sugar would be maintained.
C. Co-Products Development Programme
4.5 A co-product development programme will be worked out to address the issue of use of the various fractions of the cane biomass including molasses and ethanol derived therefrom.
4.6 A task force led by the MSA and comprising all parties concerned will submit a report by end of April 2002 after having examined the products most appropriate to the Mauritian context with due regard to technological, environmental and market aspects.
5. Field Issues
A. Derocking, Irrigation and Mechanisation
5.1 A task force comprising the Minister of Agriculture, Food Technology and Natural Resources, the Minister of Public Utilities, the Minister of Labour and Industrial Relations, the Minister of Housing and Lands, the Financial Secretary and the Mauritius Sugar Authority will be set up to consider the following issues:
(i) the Funding of Derocking/Irrigation/Mechanisation projects;
(ii) the Rationalisation of global cess with a view to making a more productive use thereof;
(iii) Tractor rates;
(iv) Land conversion for small planters;
(v) Procedures for land conversion and related issues.
5.2 The advisability, or otherwise, of a review of the various incentives given to the sugar sector in form of subsidised tariffs, rates and dues will be examined by the Task Force.
5.3 The Northern Canal System will be rehabilitated before 2005.
5.4 To ensure expeditious implementation of projects a joint public/producer coordination committee will be set up for the 2001-5 period.
B. Small Planters
5.5 The Mauritius Sugar Producers Association (MSPA), the MSIRI and the Farmers Service Corporation (FSC) should as a matter of priority define regional extension schemes where these three parties would play an active role in collaboration with the planting community.
5.6 Employees of service institutions should operate on the premise that their mission is to enhance the revenue and productivity of planters.
5.7 The FSC will have before the start of the 2001 crop to evolve a mechanism that would overcome the practical difficulties constraining the provision of services to planters.
5.8 The Robert Antoine Sugar Industry Training Centre should prepare a focussed and effective training programme for the small planters.
C. Sugar Loss
5.9 The clean cane campaign initiated in 2000 by the Ministry of Agriculture, Food Technology and Natural Resources, the Mauritius Chamber of Agriculture (MCA) and the MSA should become a recurrent feature.
5.10 The FSC and the Cane Planters and Millers Arbitration and Control Board should investigate into the reasons bringing about sub-optimal harvest and in collaboration with sugar companies promote an “optimal harvest” campaign for the 2001 crop on the model of the clean cane campaign.
5.11 There is a need for new players, new technologies and products in the fertiliser sector to maximise benefit to the planting community.
E. Planters’ Funds
5.12 The funds contributed in the context of past factory closures should be used judiciously and as a matter of priority target Derocking/Irrigation/Mechanisation projects.
F. Research Needs in Sugar Cane Agronomy and Breeding to Enhance Productivity
5.13 The MSIRI should maintain its efforts and ensure that the findings of research are expeditiously disseminated.
5.14 Research will have to be intensified in respect of soils and plant nutrition, namely the planting of leguminous crops in interrows or in rotation with sugar cane; the use of biofertilizers; the use of organic fertilisers as a nitrogen source to sugar cane; and the elaboration of a soil test method for nitrogen.
5.15 There is need to assess the performance of several mechanical implements.
5.16 Research in irrigation will have to focus on more efficient water usage, recourse to nighttime irrigation, the automation of the irrigation system, the practice of deficit irrigation and the use of effluent water.
5.17 Cultural operations and weed agronomy studies have to be conducted on high density planting, cultural practices to reduce ratoon yield decline, the development of weed management strategies to use the minimum amount of herbicides and the design of drain in the superhumid areas to reduce cost of land planning.
5.18 Research in plant physiology will concern the use of ripeners on low sucrose content canes at the start of the harvest season and the extension of the harvest season.
5.19 Breeding will refer to the development of high yielding varieties, more site specific varieties, the further shortening of the selection cycle to hasten the frequency of release of more profitable varieties.
A. Blue Print
6.1 The Blue Print for factories closing down will remain in force.
B. Voluntary Retirement Scheme
6.2 There would be a Voluntary Retirement Scheme (VRS) applicable to agricultural workers, non-agricultural workers comprising those engaged in field operations and those in factories that are not closing down, and the Etat Major. A company wishing to implement such scheme will have to submit an application to the Minister of Agriculture, Food Technology and Natural Resources.
6.3 The VRS will be offered to all female agricultural workers of 50 years or more and all male agricultural and non agricultural workers of 55 years or more. Regarding all the other employees, the offer of a VRS will be at the discretion of the employer.
6.4 Subject to paragraph 6.3, the VRS scheme above will be based on mutual consent; on the one hand, the employer cannot impose a VRS on an employee and on the other hand, an employee to whom a VRS offer has not been made cannot compel the employer to do so.
6.5 The cash compensation will be the product of N x F x W, where N is the number of years of service and includes a proportion for any uncompleted year. F is the number of months of compensation payable per year of service and shall be determined from the scale given below and W the wage or salary applicable on the day that the Minister of Agriculture, Food Technology and Natural Resources accepts that a request for a VRS be implemented.
6.6 Determination of F
||Category of employees
||No.of months per year of service
||Female agricultural worker of 50 years or more
||male agricultural or non-agricultural worker of 55 years or more
||All other cases including staff
First five years of service
Next ten years of service
Next ten years of service
Remainder of service
6.7 Land entitlement
||Category of workers
||Female agricultural worker of 50 years or more
|Male agricultural or non agricultural worker of 55 years or more
||All other cases including staff
6.8 Where an employer undertakes a VRS, all employees who have retired between the commencement of the SIE Act 2001 and the date the VRS request has been made to the Minister, shall be entitled to the benefits enjoyed under the VRS scheme.
6.10 The company undertaking a VRS which may be a Milling Company, a growing company or any other relevant company, as the case may be, shall in respect of the land granted by way of compensation:
(a) agree with the employees on the site or sites;
(b) undertake the necessary infrastructural works for the division of plots under reference, namely roads, drains, electricity and water supply;
(c) provide social amenities as would be agreed to the workers; and
(d) undertake to carry out the maintenance of the roads and drains of the new housing estates and the refuse collection at its own cost for a period of three years from the date on which the portions of land are allocated to their recipients or until such time as the local authorities take over these responsibilities, whichever the earlier.
6.11The agricultural and non agricultural worker or his children, as the case may be, shall be entitled, for purposes of erecting their houses, to
(i) loans from the Mauritius Housing Company Ltd on terms and conditions applicable for the phasing out of sugar estate camps; or
(ii) Government sponsored grants for the casting of roof slabs or for the purchase of building materials from the National Housing Development Company Ltd.
6.12 The agricultural and non agricultural workers presently living in estate houses will be given a two year period following the date on which they become owners of their land entitlements to vacate these houses.
6.19 Employees of 45 years or more, who have contributed to the National Savings Fund would be entitled to a lump sum from the Fund.
6.20 The exemptions, procedures and waivers applicable to the phasing out of camp schemes will be applicable, including the non-requirement of an Environment Impact Assessment.
6.21 The employee will be exempted from payment of income tax in respect of the cash and the land compensation payable.
C. Amendment to the Labour Act
6.22 Part V of the Labour Act will be amended as follows:
(i) Reviewing Section 26 to modify the definition of Employer to include sugar factories.
(ii) Reviewing Section 27 to maintain the acquis of existing employees and to remove the obligations to employ 20% of any supplementary labour, and to fill all vacancies that arise.
(iii) Repealing Sections 28 and 29 which were linked to the requirement to employ supplementary labour.
These amendments ,while safeguarding the rights of those in employment, will facilitate use of seasonal labour.
D. Job Contractors
6.23 Section 41 on the Joint liability of the principal and the job contractor of the Labour Act will be maintained. The agricultural and non-agricultural remuneration orders will be amended to facilitate recourse to job contractors by planters and millers while respecting the rights of those employed by the job contractor.
E. Special Desk at Ministry of Labour and Industrial Relations
6.24 A special desk will be set up at the Ministry of Labour and Industrial Relations to monitor the state of industrial relations subsequent to the amendments of the Labour Act and Sugar Industry Remuneration Order. Measures will be taken to guard against any abuse and to safeguard the interest of workers in the employment of Job Contractors and/or seasonal workers.
F. Pension Issues
6.25 The optional retirement age for agricultural workers in the sugar industry will be lowered from 58 years to 55 years for men and from 55 years to 50 years for women. Those concerned will be entitled to receipt of an actuarially calculated contributory pension at the age of 58 years for men and 55 years for women.
6.26 The National Pension Act will be amended to allow for the payment of an actuarially calculated contributory pension:
(a) to a female agricultural worker of 50 years or more;
(b) to a male agricultural worker of 55 years or more; or
(c) to a male non-agricultural worker of 55 years or more,
as from the date the contract of employment is voluntarily terminated in the context of a VRS.
6.27 Section 48 of the National Pensions Act will be amended to enable workers who have contributed to the Sugar Industry Pension Fund (SIPF) between 1974 and 1978 to be eligible for an earlier receipt of the SIPF lump sum. This lump sum represents the contribution and interest accrued thereon as from 1978 to the date the workers voluntarily terminate their contract of employment in the context of a VRS.
G. Action Plan on Training
6.28 A task force under the aegis of the MSA and comprising the MSPA, the IVTB and the Unions will be set up to consider all issues relating to training. The task force will have before end December 2001, come up with an Action Plan on training, identifying needs and proposing schemes for those employees that would be in need of such training, namely:
(i) those who would remain in employ; and
(ii) the young persons availing themselves of a VRS.
H. Modernisation Fund for Trade Unions
6.29 A Training/IT fund with an initial amount of Rs5.0M, raised from cess, will be established to foster the training of trade unionists of the sugar sector and to enable trade unions to acquire IT and related equipment and software.
I. Recruitment and Promotion Policy
6.30 There should be a more open and transparent recruitment and promotion policy to attract the best qualified Mauritians to the sector. Growing, milling and power companies should be seen to be implementing such a policy.
6.31 As part of the efforts to reduce costs, substantial reductions should be effected to fringe benefits of the Etat Major and the expenditure of city offices.
7. Institutional Issues
7.1 The Task Force at paragraph 5.1 would consider cess issues.
7.2 Concurrently, the Mauritius Sugar Syndicate (MSS) and the Sugar Insurance Fund Board (SIFB) should reduce their expenditure.
B. Review of Service Providing Institutions
7.3 A Task Force will be set up specifically to review the role of service institutions in the sugar sector, make an assessment of those essential services that should still be provided and propose new structures for the effective delivery of these services.
C. Sugar Insurance Fund Board (SIFB)
7.4 The SIFB should embark on a public relation campaign to explain its role and importance for the industry.
7.5 The report on the current actuarial review of the SIFB should be carefully examined before proceeding with changes to the existing framework.
D. Standardised Information Format
7.6 The MSA should in collaboration with all concerned design a standardised information format before the end of 2001.
E. Scholarship Schemes
7.7 The operation of the scholarship schemes in favour of children of employees of the sugar industry should be reviewed and the advisability of a common management examined. However, such a management should not involve additional cess funding.
8. Land Conversion
8.1 Section 5 of the SIE Act 1988 will be amended to enable VRS costs to be recouped through the sale of land on which no land conversion tax is payable.
8.2 A review of the irrigation zone boundaries will be conducted in the light of the irrigation development programme and, wherever possible, land requiring irrigation and which will not receive such irrigation will be proposed for a rezoning exercise.
8.3 A new 1/3 scheme whereby Government will obtain 200 arpents and the producers convert 600 arpents without payment of land conversion tax will be introduced. This new 1/3 arpents scheme will be applicable to the medium planters also.
8.4 For the 1/3 and 1/2 schemes (where Government obtains one unit of acreage and the applicant is entitled to convert two units without payment of land conversion tax) as well as for the incentives under Section 5(7)(c) and (d) of the SIE Act 1988 to be effective, the following are required:
(i) a fast track approach to the grant of all permits and authorisations, land conversion is but one permit;
(ii) rezoning where required and possible;
(iii) the three year time frame for conversion to be carried out to be extended to five years; however, Government would obtain its land within the prescribed six months; and
(iv) promoters should be able upon receipt of a letter of intent from the Morcellement Board to furnish a bank guarantee corresponding to the estimated value of infrastructural works and to accept from prospective buyers deposits for the reservation of plots up to the amount of bank guarantee provided.
8.5 Schemes relating to hotel and touristic development, Information and Communication Technology and Biotechnology will be exempted from the payment of land conversion tax.
9. Democratisation of Ownership
9.1 A registration duty of 2% will apply to all cases described in Subsection 3(1) of the Sugar Sector Package Deal Act 1985 which promotes the transfer of land to small and medium planters. The aggregate area referred to in this Section will be increased from 25 to 50 arpents. This Section would also apply to the SIT.
9.2 Tax exemption or remission can be considered in the context of a merger or a take over, if the merged or larger company undertakes:
(i) to be listed on the Stock Exchange; and
(ii) to have the SIT or any entity designated by Government as shareholder or to sell its land at nominal prices to the SIT or any entity designated by Government.
10. Price of Sugar on the Local Market
10.1 The price of sugar for domestic and industrial users will not be increased.
11. Biotechnology and Strategic Alliances
11.1 A task force comprising persons with wide experience or professional knowledge in the fields of biotechnology, intellectual property and agricultural trade will be set and submit a report by April 2002 on a Biotechnology Development Programme.
11.2 The Programme will inter alia:
(i) chart out the course of action that would lead the country on the paths of excellence;
(ii) lay down the foundations of fruitful collaborative work with countries of the Indian Ocean Rim, namely, India and Singapore; and
(iii) spell out the human resource and training needs to undertake a quantum leap.
11.3 It is essential that the expertise and experience available locally be fully tapped by companies and consulting firms engaged in regional ventures. Arrangements will have to be made to facilitate the full use of local resources. Some of the areas that could be covered include:
(i) cane variety development and related agronomic issues;
(ii) cane milling and cogeneration - investment and technology;
(iii) policy formulation and related legislative framework;
(iv) cogeneration and power purchase agreements;
(v) valuation of assets; and
(vi) environmental pollution assessment and monitoring.
12. Financial and Taxation Issues
12.1 Concessionary finance will be provided to producers in drought stricken areas (factory areas of Belle Vue, Mon Loisir, Médine and ex Constance) on the following terms:
(i) Rs10.000/arpent for producers cultivating not more than 100 arpents;
(ii) a concessionary rate of interest rate of 5%; and
(iii) the loan would be repayable in 5 equal instalments.
12.2 The Land (Duties and Taxes) Act 1984 will be amended to enable millers/power companies implementing schemes under Section 5 of the SIE Act 1988 related to factory closures, the VRS or modernisation schemes to pay Land Transfer Tax at the rate of 5% and to be exempted from the payment of the Capital Gains Tax.
12.3 Milling and growing and power companies will be able upon receipt of a letter of intent from the Morcellement Board to furnish a bank guarantee corresponding to the estimated value of infrastructural works and to accept from prospective buyers deposits for the reservation of plots up to the amount of the bank guarantee provided.
12.4 Transactions involving the transfer of land to employees involved in VRS schemes and factory closures will be exempted from payment of Registration Duty, Land Transfer Tax, Capital Gains Tax and Morcellement Fee. In addition these transactions will not be required to undertake Environment Impact Assessments. Such transactions will be deemed to be part of the socio-economic policies of Government for purposes of outline schemes.
12.5 Proceeds arising out of the sale of land under the 1/3 or 1/2 schemes and Section 3(1) of the Sugar Sector Package Deal Act 1985 will be exempted from payment of income tax.
12.6Bridging finance will be provided to producers undertaking the VRS schemes.
13. Mid Term Review
13.1 A mid review of the Plan would be effected at the end of 2003. The review would take stock of progress and recommend corrective or new measures for the remaining part of the 2001-5 Sugar Sector Strategic Plan.
14.1 It is our mission as a responsible and visionary Government to ensure that a viable sugar industry is passed on to future generations who would then avail themselves of the multifaceted opportunities offered by a strategic crop, the cane plant.
Ministry of Agriculture, Food Technology and Natural Resources
28 June, 2001