As the government exits the sugar industry, divesting its farms and factories to the cooperative movement, one of its top economists revealed more than a dozen years of massive losses for the island’s sole remaining sugar factory.
Senior economic advisor Ambassador Clyde Mascoll blamed a substantial difference between wholesale and retail sugar prices, which was mostly controlled by a single private sector firm, for the “hundreds of millions” the former state-owned Portvale Sugar Factory lost.
But indicating that the price difference had ended, he suggested that an obstacle to viability had been removed for the cooperative taking the government’s sugar growing and milling business.
The revelation came during Thursday’s Down to Brasstacks programme on VOB, which covered the Agricultural Business Company Ltd. (ABC) and Barbados Energy and Sugar Company Inc.’s (BESC) takeover of the former Barbados Agricultural Management Company (BAMC).
Ambassador Mascoll noted that while the sugar industry had been struggling for years owing to several inefficiencies, one of the primary areas of great worry was the fact that, for nearly two decades, Portvale had been selling sugar at a large loss to an undisclosed private company, while the firm continued to earn large profits year after year.
He explained: “We were selling sugar at $1 300 per tonne, and it was being retailed for $3 200 per tonne. We were selling Strike A sugar [higher grade], for $1 850 per tonne, and it was being retailed for in excess of $4 000 per tonne. When Portvale made the decision to sell that sugar, it was then asked to package it at a cost to Portvale, without the price being changed.
“So imagine you are incurring costs, but you are not imposing a higher price…. It therefore means it constitutes a loss to the entity. Those kinds of practices have already been stopped.”
The senior economic adviser who declined to name the firm also said that due to the great differential between sales by Portvale and the company, the government lost out on millions of dollars over the last 13 years.
He said: “A private sector interest benefited from it because they recognised that the price of sugar did not change in 13 years, even though the costs were increasing. Portvale itself was packaging the sugar for the individuals, who simply collected the sugar, and carried it to the retailer, and in that space, Portvale was not able to sell its sugar for more than the $1 300 or $1 850 that I told you about.
“Even though the price was stated at those two figures, when Portvale then packaged the sugar it did not increase the price to that distributor. So who enjoyed it? The people who were in between the manufacturer of the sugar, and the retailing of the sugar. Over that period, the government made hundreds of millions of dollars in losses.”
Ambassador Mascoll added that because of this discrepancy and previously known inefficiencies within the system, the island has also not seen the true profits which could have been achieved with its high-quality molasses.
“We have been producing the best molasses in the world in Barbados – by accident, because of inefficiencies, and that is because all of the sucrose remains in the molasses and therefore the purity of our molasses is 58 per cent compared to the 32 per cent imported,” he told the radio audience. “Portvale was forced to sell its molasses, its superior molasses, for the same price as the imported molasses.”
Ambassador Mascoll stated that the new path that ABC and BESC are aiming to take in the sector would result in a proper appraisal of sugar, molasses and other byproducts.
He said: “When people looked at the sugar industry in the past, they evaluated Portvale’s success purely on the basis of the production of sugar, but what we discovered in that by producing sugar, you also produced molasses. So, therefore, if you take the costs of Portvale and divide it only by the sugar production, you are going to understate what it was really doing. There is no additional costs really to the production of molasses.
“Previous studies of the industry never separated sugar from molasses, and therefore never appreciated the value. The real future in sugar and molasses is actually molasses because the domestic market for sugar can only hover around 4 000 tonnes per year. But currently, Portvale supplies only 10 per cent of the domestic market for molasses. Therefore, going forward we can make a difference.” (SB)
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