Domestic Sugar Industry Getting Back on Its Feet

EghtesadOnline: Around 30% of sugar cube factories went out of business under the two-term administration (2005-13) of former president, Mahmoud Ahmadinejad, following the decision to remove import tariffs.

News ID: ۷۴۳۹۰۶

24 September 2017

Eight factories were closed, resulting in the unemployment of around 18,000 workers, the Persian daily Shahrvand reported.

The tariffs were put back in place under the government of President Hassan Rouhani and imports were restrained.

Now two big sugar cube companies, namely Dezful Sugar Cube Factory and Fasa Sugar Factory, are planning to reopen soon, according to Financial Tribune.

The former, located in Khuzestan Province, will reportedly come back on stream in the Persian month starting Sept. 23 after being closed for over a decade. Fasa Sugar Factory is expected to reopen within the next two months.

On the order of the head of Planning and Budget Organization, Mohammad Baqer Nobakht, some 100 billion rials ($2.57 million) were allocated in the last fiscal year (March 2016-17) for the revival of Dezful Sugar Cube Factory and 100 billion rials have been allocated this year (March 2017-18).

There have been agreements to inject an aggregate of 300 billion rials ($7.710 million) separately for the launch of the factory.

Dezful Sugar Cube Factory was founded in the 1970s in Shoush, Khuzestan Province. Known as the biggest sugar factory in the Middle East, it created jobs for 600 people.

Before going out of business after three decades of activity, cultivation of sugarbeet over 9,000 hectares in Shoush was considered the main economic activity of the province. However, after the closure of the factory, the number turned zero.

The reopening of the factory can lead the province to economic prosperity as it boasts a daily capacity for producing 5,000 tons of sugarbeet, refinement of 500 tons of raw sugar, production of 300 tons of bagasse and production of 200 tons of sugar from molasses.

In Iran, there are three types of sugar and sugar cube factories. The first type is the ones using sugarbeet as raw material. There were 36 factories of this type before the shutdown of the eight factories.

When Dezful and Fasa companies reopen, the number will reach 28.

The second type uses sugarcane as raw material. There are currently nine such factories.

And the last type refines the raw sugar imported into the country. There are only five factories of this type.

According to Bahman Danaei, secretary of Iran Guild Union for Sugar and Sugar Cube Factories, after the eight factories were closed, production declined and factories could not pay sugarbeet farmers, leading to a drop in sugarbeet production from 1.274 million tons in 2006-7 to 500,000 tons in 2008-9 and 2009-10.

Danaei is not hopeful about the re-launch of the other six factories.

“Shortage of financial resources is a major problem. For now, our efforts are focused on reopening the Dezful factory that has a special importance in Khuzestan Province since the province can be the leading producer of sugarbeet in the country,” he said.

Significant Potential for Job Creation

Danaei believes sugar and sugar cube industry has significant job creation potential, as each factory usually engages 1,000-2,000 sugarbeet farmers and an average of 500-600 workers.

The job creation potential of this industry, he said, is the reason why sugar factories are usually established in underprivileged regions to bring economic prosperity to those areas and help the locals.

According to Danaei, Dezful Sugar Cube Factory has a nominal capacity of using 5,000 tons of sugarbeet daily. It means the factory needs 500,000 tons of sugarbeet for a 100-day production cycle and produces around 60,000 tons of sugar on a yearly basis.

“Re-launch of the factory will create direct jobs for 300-350 people while 300-350 people will find seasonal employment,” he added.

The Fasa Factory, when reopened, will use 80,000 tons of sugarbeet for a 100-day production cycle and will produce 11,000 tons of sugar. It will generate 200 direct jobs and the same number will work seasonally.

“[Agriculture] Minister [Mahmoud] Hojjati agreed with importing sugar only to the extent necessary. In 2006-7, when the country needed 600,000 tons of sugar, some 2.5 million tons were imported but during the last four years we only imported as much as we needed, filling the gap between production and consumption,” he said.

Danaei noted that in the last three years, a majority of factories have been operating at over 75% of their production capacity and a few at 100%.

According to Shahrokh Ramezan-Nejad, the head of Public Relations Center with the Ministry of Agriculture, the government aims to achieve self-sufficiency in sugar production by 2021, ILNA reported.

A ceremony was held at the headquarters of Iran Chamber of Commerce, Industries, Mines and Agriculture in Tehran on July 30 to celebrate the record high production of 1.65 million tons of sugar in the last Iranian year (March 2016-17).

According to ICCIMA, this amount of sugar production is unprecedented in the last 120 years.

Danaei said the record production indicates Iran is now able to meet 75% of its demand for sugar through domestic production.

Iranians consume between 2.2 and 2.4 million tons of sugar a year and last year an import volume of 550,000 tons of the product was needed.