Tufton wants review of payment regime by next sugar crop

Mark Titus, Business Reporter

Minister of Agriculture and Fisheries Dr Christopher Tufton has mandated the Sugar Industry Authority (SIA) to have the new payment regime in place for the sector by the start of the 2011-2012 crop.

The recommendation for a review of the contentious cane payment formula was made following the sugar industry enquiry last year.

The three-man commission, led by Professor Alvin Wint, identified issues such as the appropriate payment for substandard cane, incorporation of a value for bagasse used in electricity generation, payment structure, review of the appropriate level of mandatory testing of cane, independence of core samplers, and considerations of incorporating quality benchmarks into payments to contractors.

"It is going to take time, but we are commencing almost immediately," Ambassador Derrick Heaven, executive chairman of the SIA, told Wednesday Business. "There are a whole host of things that impact on the formula that need to be looked at, but I think we have some time to review it and make any changes that are necessary."

Heaven would not say who would head the SIA team mandated to examine the issues, but pointed to some things that are likely to dominate the review.

"There is the question of whether or not the formula needs to be adjusted to reflect any new (by) product," he said.

Allan Rickards, chairman of the All-Island Jamaica Cane Farmers' Association, believes it is easier to work out a change in the payment system than in the payment formulae.

Payments for sugar cane are done in three tranches and according to Rickards, "The players in the industry only need to decide among themselves how much they want at the respective tranches."

Under the system, 70 per cent of the money is paid to the industry in the first payment following the reaping of sugar cane and delivery to the factory, but some have argued that this is not sufficient to cover operational costs.

"Some of the stakeholders are asking for 80 per cent payment up front instead of 70, and some are even demanding 100 per cent, arguing that they can manage their own business, and this is what has been dominating discussions," said Rickards.

"The first payment (70 per cent) is what is the projected price and by the second payment (27.5 per cent) there is a revised projection, which is usually upward.

"The third payment (2.5 per cent) comes by the end of October, by which time all the proceeds from the sale of sugar is collected and therefore there is an actual figure on the price that is paid."

Up to 1953, the system by which the industry was paid was decided at a meeting of cane farmers and manufacturers before the crop every two years, where the stakeholders sought to agree on a price.

searching for solution

In 1955, when another negotiation was to take place, an agreement could not be reached, which prompted a series of commission of enquiries over the next few years out of which the present formula was decided on.

The failure of the stakeholders to arrive at a uniformed method of dealing with the issue of substandard cane and the factors to determine the quality of the product over the years now leave the SIA with the challenge of finding an amicable solution.

"It will require everyone in the industry to sign off on this, and some of those things are going to require significant consultation, " Heaven stated.

But Rickards would like to see the introduction of a quality incentive scheme in the harvesting process.

"The farmer is paid by the quality of the juice in the cane, while contractors are paid purely by the weight, whether the cane is good or not," Rickards said. "We would wish to see a quality incentive introduced in the harvesting process."