Ray of hope for 6 sugar mills

The government is close to striking a deal with foreign investors for reopening the six shut sugar mills as part of its plan to make the losing Bangladesh Sugar and Food Industries Corporation (BSFIC) sustainable.

A consortium comprising Thailand's Sutech Engineering Co., the UAE's Sharkara International and Japan's Sojitz Machinery Corporation has expressed interest in investing $1 billion (about Tk 8,000 crore) to upgrade the outdated facilities at the six mills, according to its investment proposal. The Daily Star has a copy of the proposal.

Production at Pabna Sugar Mills, Shyampur Sugar Mills, Setabganj Sugar Mills, Kushtia Sugar Mills, Panchagarh Sugar Mills and Rangpur Sugar Mills has been on halt since December last year amid mounting losses.

In fiscal 2019-20, the six mills had logged in losses of about Tk 380 crore, with Setabganj Sugar Mills racking up the most losses of Tk 84 crore, according to the BSFIC.

Commercial production at the six mills will begin within 30 months of signing the final agreement with the consortium, according to Md Emdad Hossain, a local representative of the investors.

The consortium will supply a high-yielding variety of sugarcane to local farmers at free of cost such that there would be enough raw materials to keep the mills running around the year.

The high-yielding variety of sugarcane can produce 80 tonnes of sugarcane per hectare per year, according to Hossain. The local variety yields 20 tonnes of sugarcane per hectare per year.

The consortium will produce food products from the sugarcane by-products and high-end spirits that would be sold abroad.

As per its projections, the consortium will be able to recoup its investment within eight years, Hossain said.

Of the $1 billion to be invested, the Japan Bank for International Cooperation and the Export-Import Bank of Thailand will provide 70 percent of the sum.

The remaining 30 percent will come from the consortium, which will form a 50:50 joint venture with the BSFIC that runs the 15 state-owned sugar mills. Previously, the consortium wanted the JV to be 60:40 in its favour.

"We do not have a financing problem for the project as the necessary feasibility study has been conducted -- it will be a commercially viable project," Hossain added.

Contacted, Industries Minister Nurul Majid Mahmud Humayun acknowledged the government is close to wrapping up negotiations.

The most viable proposal to make the mills profitable has been selected, he said.

The BSFIC has received seven investment proposals from foreign investors for upgrading the sugar mills.

"They will produce different by-products in line with sugar production all year round."

At present, the production lines run for only three to four months in a year, so the government has to provide a huge subsidy to meet the overheads, he said.

All the state mills will be modernised in phases to make those profitable and to uphold the sugarcane farmers' livelihoods, Humayun added.

Of the 15 sugar mills under the BSFIC, only one is profitable: Carew & Co. 

Between fiscals 2015-16 and 2019-20, the BSFIC logged in losses of Tk 3,976 crore. It has bank loans of about Tk 7,895 crore and owes about Tk 521.8 crore in arrears to workers.

"We are very positive about the proposal to modernise the sugar mills to make BSFIC profitable," said SM Alam, who is leading the negotiations in the industries ministry.

The Prime Minister's Office (PMO) had a couple of queries before giving the nod to the foreign investment. The queries pertain to the government's share in the venture and the guarantee for the foreign companies' investment.

The deal will close swiftly once all PMO's queries have been answered, said Alam, additional secretary to the state-run corporation under the industries ministry.