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SIE BILL : DES MESURES POUR LE SECTEUR SUCRE AVEC L’ABOLITION DES QUOTAS VERS L’UNION EUROPEENNE A PARTIR DE SEPTEMBRE 2017

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22Dec

SIE BILL : DES MESURES POUR LE SECTEUR SUCRE AVEC L’ABOLITION DES QUOTAS VERS L’UNION EUROPEENNE A PARTIR DE SEPTEMBRE 2017

Le Sugar Industry Efficiency (Amendment) Bill a été présenté et votée à l’Assemblée nationale le mardi 20 décembre. Ce projet de loi vise à préparer l’industrie sucrière à relever le défi de l’abolition des quotas d’exportations de sucre vers l’Union européenne à partir du 30 septembre 2017.

L’abandon des terres sous culture de cannes par les planteurs est la préoccupation de ce gouvernement. Car pour la production annuelle de 400 000 tonnes métriques de sucre il faut maintenir 54 000 hectares de terres. Le prix rentable du sucre est estimé à Rs 16 000 la tonne. « Si les planteurs, surtout les petits planteurs, devaient recevoir moins que ce prix rentable, ils cesseront de planter la canne et cela va aggraver davantage la situation, d’autant que l’industrie sucrière a besoin de la contribution de chaque planteur pour rester viable. ». Des mesures que le gouvernement a prises, depuis décembre 2014, ont été pour apporter confort et soulagement à la communauté des planteurs. Il y a la création du Sugar Cane Sustainability Fund, la taxe de Rs 20 par litre d’alcool produit par les embouteilleurs pour assurer des revenus additionnels de Rs 270 par tonne de canne aux planteurs, des amendements à la Sugar Insurance Fund Act pour une compensation de Rs 2 000 par tonne de sucre produit à tous les planteurs assurés et l’exemption du paiement de la prime d’assurance au SIFB aux petits planteurs produisant jusqu’à 60 tonnes de sucre.

Le ministre Seeruttun a souligné que le secteur sucre connait des difficultés au niveau international. D’où la décision du gouvernement d’apporter des amendements à la Sugar Industry Efficiency (Amendment) Act. Il a expliqué que ce projet de loi a pour objectifs, entre autres, de préparer l’industrie sucrière à relever les défis de l’abolition des quotas de sucre de l’UE, de mettre sur pied un Sugar Cane Sustainability Fund, de faciliter la transition de Maurice vers une économie basse en émissions de carbone, et d’améliorer le régime de la conversion des terres. Bien que la contribution du secteur du sucre au Produit Intérieur Brut (PIB) ait diminué ces dernières décennies, dit-il, ce secteur reste un pourvoyeur important de devises étrangères, emploie un nombre appréciable de personnes et contribue à nos besoins en énergie.

Ci-dessous le discours du ministre Seeruttun a l’Assemblee Nationale dans son integralite.

“I move that the Sugar Industry Efficiency (Amendment) Bill (No XXXVII of 2016) be read a second time.
As enunciated in the Explanatory Memorandum, the main object of this Bill is to amend the Sugar Industry Efficiency Act to-
(1) prepare the sugarcane industry to face challenges in view of the abolition of European Union (EU) country sugar quotas;
(2) implement measures destined to ensure the long-term viability of the sugarcane industry;
(3) provide for the setting up of a Sugar Cane Sustainability Fund for the purpose of fostering the production of sugarcane and bagasse;
(4) lay the foundations for Mauritius to transit to a low carbon economy, by inter alia, providing for the use of lower carbon emission fuel in the transport sector;
(5) empower the Mauritius Cane Industry Authority to develop-
(i) a Renewable Sugar Cane Industry Based Biomass Framework to enable the country to best fulfill its international commitments;
(ii) an Ethanol and Molasses Framework to allow the mandatory blending of ethanol and mogas;
(iii) a Sugar Based Agro-Industry Framework to promote a sugar based agro-industry and generate value added sugar or other sugar products through the use of local raw materials;
(6) ensure that consumers secure quality sugar-based products which comply with international norms;
(7) make better provisions for revenue accruing to planters from molasses and the allocation of molasses between distilleries;
(8) make better provisions with respect to land conversion; and
(9) provide for the implementation of the award of 31 July 2015 of the Arbitration Panel regarding seasonal labour in the sugarcane industry.

My Ministry is taking this opportunity to make other amendments to the Sugar Industry Efficiency Act, to remove obstacles in the way of business facilitation, more particularly in respect of land conversion.

Opportunity is also being taken to amend other Acts in line with the objectives of this Bill including the need to re-engineer the Mauritius Cane Industry Authority, the MCIA and to ensure the long-term viability of the sugar cane cluster.

The sugar industry, now known as the sugar cane industry, has been facing daunting challenges throughout its history and successive governments have always strived to come up with new policies and necessary measures to ensure the sustainability of the industry.
This was very important because the sugar sector at the time of independence constituted the main economic activity and the principal creator of wealth and employment.

The revenue generated by the industry over the years has been wisely used to diversify the economic base of the country and to set up new pillars in the economy

Although the contribution of the sugar sector to the G.D.P has dwindled during the past decades, it still remains a major foreign exchange income earner, employs an appreciable number of persons and contributes to the energy requirements of the country.
As the House is aware, the Mauritian sugar industry is essentially export-based, with over 90% of production exported to the EU.
As such, any event occurring in the EU market has a direct impact on the local industry. The reform of the EU Sugar Regime in 2005 which brought an end to the Sugar Protocol was accompanied by a reduction of 36% in the price of sugar exported by ACP sugar producing countries to the EU market.

That reform was indeed a major blow to the industry. The Multi-Annual Adaptation Strategy was devised in the wake of that reform and was implemented to mitigate the effects of that reform on our industry and to ensure the sustainability and viability of the sector.
Whilst we were still implementing the Multi-Annual Adaptation Strategy Programme, the EU came up with another drastic measure, namely the abolition of the internal sugar production quota due to take effect now in September 2017.

This measure will undoubtedly render our sugar less competitive on the EU market and will destroy all the efforts made by Government and the industry under the Multi-Annual Adaptation Strategy during the last 10 years to keep the industry afloat.

And to make matters worse, the advent of Brexit this year has brought a lot uncertainties for the sugar sector given that we export an appreciable quantity of sugar to the UK. There is no predictability and we do not know what the future lies for us.

The industry is already facing a lot of problems with the drastic fall in the price of sugar which was around Rs 13,000 per tonne for the 2014 and 2015 crops.

The rate of abandonment of small planters fields is becoming alarming and this will obviously impact on sugar production.
For two consecutive years, i.e 2015 and 2016, annual sugar production has fallen below 400,000 metric tons. The viability price of sugar has been estimated at Rs 16,000 per tonne.

If planters, especially the small planters, are to receive less than this viability price, they will move out of business and this will further aggravate the situation given that the industry needs the contribution of each and every planter to remain viable.

This Government has not remained insensible to the plight of the industry, particularly that of the small planters.

The recommendations made by LMC on the economic, social and environment impact of the abolition of the internal quota of sugar in the EU market have been carefully examined and many measures contained in the LMC report have been implemented and others are in the process of being implemented through this Bill.

I would now wish to inform the House regarding the measures taken by this Government since assuming office in December 2014 to bring comfort and relief to the planting community:-

Firstly, a Sugar Cane Sustainability Fund was set up early this year to compensate planters for the low price they are obtaining for the bagasse. For crop 2015, a sum of Rs 137 million was disbursed in March/April to all planters as follows:
(i) Rs 1,100 per tonne of sugar up to 60 tonnes produced; and
(ii) Rs 300 per tonne of sugar in excess of 60 tonnes produced.

For crop 2016, the data concerning production of sugar by each planter is not known as yet because the harvest and milling of canes are ongoing and it is due to be completed before the end of the year. However, in order to enable planters to ease their cash flow, a part payment is being effected before the end of this year and the balance will be paid in January 2017.

Secondly, Government has introduced an additional tax of Rs 20 per litre of alcohol produced by local bottlers to ensure additional revenue of Rs 270 per tonne of sugar to the planters. This measure is already effective following amendment made in the Finance Act 2016.

Thirdly, necessary amendment has been brought to the Sugar Insurance Fund Act to enable the payment of a compensation of Rs 2000 per tonne of sugar to all insured planters. For crop 2014, planters producing up to 60 tonnes of sugar benefited from an additional compensation of Rs 1,400 per tonne of sugar and

Fourthly, small planters producing up to 60 tonnes of sugar have been exempted from the payment of insurance premium to the SIFB during the past two years. Government proposes to extend this measure for future crops. This measure will further help to ensure the viability of the small planters. On average the premium is estimated at Rs 700 per tonne of sugar.

Let me now come to the different clauses of this Bill.

Under clause 4, section 11 of the Act is being amended to re-introduce the 1:2 scheme which allows Government to acquire land for development at a nominal price. In return, the seller can convert free of land conversion tax two units of acreage for every unit of acreage sold to government. This provision was first introduced in 2001 but for reasons unknown, was repealed in 2013.

In clause 5, two new sections 13 A and 13B are being inserted. Section 13 deals with the Bagasse Transfer Price, which was first introduced in 1993 and was subsequently challenged and in 1999, Government arrived at an out of Court settlement which is now embodied in the Statute Book. Section 13A refers to the sugar cane sustainability fund which stems from the Landell Mills Report and is given as a form of support to planters for remaining in cane. This is in line with the concept of a transfer from consumers to producers for maintaining a product considered as public good.

Needless to add here the positive role of bagasse in avoiding the recourse to fossil fuels with their emissions of carbon dioxide and sulphur dioxide and the positive role of cane in protecting and preserving land resources and avoiding the muddying of our lagoons. Bagasse fulfills the function of a public good which has to be fully reckoned with.

As indicated in a recent report of the International Energy Agency in 2016 the rapid spread of renewable energy is a bright spot in the global energy transition towards a low carbon economy.

The House may note that this is documented in the “The Medium-Term Renewable Energy Market Report 2016” Renewables accounted for more than half of the world’s additional electricity capacity last year.

Furthermore, the IEA also in its World Energy Outlook 2016 sees broad transformations in the global energy landscape.

As a result of major transformations in the global energy system that take place over the next decades renewables will play an instrumental role.

Besides, aiming at increasing our production of energy from renewable resource and be less dependent on fossil fuel we would also be contributing towards achieving the challenge of reaching the pledges made for the Paris Agreement on climate change.

We are a very small country but we want to show the world that we can play an instrumental role in the fight of reducing carbon emission.
Furthermore, we have the ability to undertake major research project and I am sure the country will benefit enormously from such a framework.

But I must emphasize that in all this strategy we would be working in close collaboration with MARENA and ensure that the best use is made of resource available.

Section 13 B departs from bagasse and cane and refers to other biomass be it of cane or other origin. The object of this clause is to call upon the MCIA to come up, at least before the Budget 2017/2018 with a framework. Already work has been undertaken for some forms of biomass, cane trash being one such instance.

Biomass, as opposed to solar and wind, provides firm electricity and is expected to be a very important component of the strategy of Government to increase the share of renewable electricity to nearly 40% by 2030.

My Ministry also views the biomass strategy as a complement of its strategy to bring back abandoned land under agriculture.

It is worth mentioning that an Agricultural Land Management System, as announced in the Budget Speech 2016-2017, has been set up at the level of the MCIA to make an inventory of abandoned sugar cane land and to see how these lands could be utilized for the production of other biomass, in addition to bagasse, to produce electricity.

In clause 7, a new section 15 is being inserted and it deals with the quality of sugar provided to consumers. Henceforth sugar will have to adhere to national norms as may promulgated by the Mauritius Standard Bureau and also in line with EU norms.

This measure has to be viewed with the one taken in the Finance Act 2016 to impose a duty of 15 % on all sugars that are not destined for refining. This couple of measures in addition to its impact on consumers is also expected to give a boost to local refining.

My attention has been drawn to some technical parameters that need to be taken on board in this bill to better differentiate between raw/special sugars and white sugar. I accordingly propose to circulate an amendment to that effect at Committee stage
In clause 8, provision is made for the MCIA to come up with a framework for a sugar based agro-industry. Quality sugar from local refiners and growing demand of sugar based agro products in Africa have motivated Government to move in this direction.

Equally, this move is expected to stimulate the production and use of local fruits as detailed out in the Tenth Schedule. This provision is in line with the policy of my Ministry to promote the agri-business sector as outlined in the Non-Sugar Sector Strategic Plan 2016-2020.

In clause 9, new sections 15 B, 15 C, 15 D and 15 E referring to the Ethanol and Molasses framework are being inserted.

Section 15 B spells out the main objectives of the framework which inter alia shall be the mandatory blending of ethanol with mogas, the use of ethanol as a substrate or ingredient, and the use of molasses for syrups and beverages.

The ethanol framework which has been referred to in the 2016/2017 Budget Speech and which we are to finalise before 30 June 2017 comprises five elements
1. The price paid for molasses
2. The allocation of molasses to various production units
3. The type and level of blending of ethanol with mogas
4. Pricing of ethanol
5. Practical aspects

Section 15 C refers to the pricing issue and mentions a basket of values.

First, the price sold to three categories of producers shall be the fob price determined by the MCIA based on a Rotterdam reference price.
This has already been adopted by the Control and Arbitration Department of the MCIA. This price is around Rs 2000/tonne of molasses
Second, the price paid by exporters of molasses: Rs 2000/tonne

Third, the price paid by distiller bottlers producing alcohol for the local market, which will not exceed 1.75 of the fob price mentioned earlier: Rs 3500 currently Fourth, producers will also benefit from the contributions raised from distiller bottlers and which amount to Rs 40 per litre of absolute alcohol sold on the local market.

As for bagasse, this is also a transfer from consumers to producers so that they sell molasses at a reasonable price to processors and in turn consumers are procured with goods at affordable prices. It has never been the intent of the legislator to allow a transfer from consumers which ends up overseas.

Current molasses production amounts to 130 000 tonnes, the Control Board allocated 65 000t to Omnicane, 35 000 tonnes are used by potable alcohol producers and the rest is exported by one company.

For the future, a Joint Committee will be established so as to ensure optimal value addition from molasses. This Committee will abide by four objectives and rational criteria:
· Equal saturation of installed capacity as at January 2016
· Viability of the distillery engaged in the production of ethanol for blending with mogas
· The efficiency of conversion of molasses , a figure of 250 litres has been taken
· An amount to be allocated to potable alcohol distilleries

I understand from the MCIA that the allocation exercise would be completed before 28 February 2017 so that operators have sufficient time to prepare themselves for crop 2017. This allocation would be of course modified should conditions of force majeure arise.

Three options have been examined, one where the percentage of ethanol in the blend is 10% , requiring some 16 million litres in the immediate medium term , a percentage of 5% requiring 8 million litres and a percentage of 2.5% requiring 4 million litres.

No decision has yet been taken except that the percentage cannot go below 2.5%.

Once allocation is known, work will commence on the pricing mechanism and suffice it to say that the consumer will not make further sacrifices, it has already made an effort equivalent to Rs 170 million.

The Bill would have covered 3 out of 5 aspects of an Ethanol Framework.

Clause 12 deals with labour issues.

The employees of the sugar cane industry are an important stakeholder and therefore it is a sine qua non condition that due consideration be given to their interest.

I must say that we firmly believe and have given the required consideration through the consultation process.

We have consulted the employees of the industry through their trade union at various stages in the process.

We had first met the Trade Union during the study and after the publication of the LMC Report. They had also the opportunity to express their views on the proposed amendments to the legislation.

It is important to apprise the House that this Government has always given due consideration to the interest of the employees and this dates back in December 1988 when the Sugar Industry efficiency Act was passed.

It is good to remind the House on some of the provisions contained in that legislation, namely
(i). Redefinition of Permanent labour
(ii). Seasonal Employment. In fact Seasonal Labour goes as far back as the early 70’s
(iii). Review of Productivity Bonus
(iv). Review of Pension Scheme
(v). Fairness in recruitment
(vi). Provision of Training Facilities

I would like to come to the provision which we are introducing in this Bill.

We know that the issue of the permanent and seasonal labour remains a sensitive issue and this has remained so for a very long time.
The House will note that the issue of seasonal labour was canvassed by the Joint Negotiating Panel (JNP) and the then Mauritius Sugar Producers Association (MSPA) at the level of the Commission for Conciliation and Mediation (CCM) Agreement could not be reached at the level of the CCM and this item was included in the Arbitration set by Government in 2014.

The recommendation of the Arbitrator on this particular dispute was as follows:
I Quote

“This Arbitration therefore recommends that Section 34 and Section 35 should be amended (i) to clear all ambiguities, and (ii) more importantly, to cater for the current needs of the sugar industry
In this regard, it considers that for any specific year, the number of man-days allowable should be a reasonable percentage of man-days of the total labour force in the previous year.”
End of quote

This Bill provides for the continuation of the process in order to find a satisfactory outcome which will suit the need of all the stakeholders.
It is appropriate for me to say that we cannot just come up with a figure out of the blue and think that it will fit the need of one and all.
There is need to for proper analysis and this task has been given to the MCIA and together with the relevant stakeholders will find the necessary solution.

This will of course be in close collaboration and consultation with all the Ministry of Labour, and all the stakeholders.
The option proposed is the most plausible one and I am confident that we shall find the appropriate formula.
In clauses 14 and 15, land conversion is rendered business friendly.
First, land not under cultivation 10 years before an application for land conversion is made is henceforth not considered as agricultural land and is excluded from the purview of the SIE Act.
Second, generally small owners of land acquired in past agricultural morcellements would more easily convert their land when they need it for residential and other development purposes.

Third, the creation of land conversion rights to allow greater flexibility in use for entitlements earned in the context of the sugar reform and land exchange.

Fourth, the possibility to use the LCRs for smart cities.

Fifth, limitations on the transfer of LCRs to smart cities.

Sixth, increasing the extent convertible by any given planter registered with the SIFB on 31 May 1999 from one arpent to one hectare or 2.37 arpents and

Seventh, exempting small planters buyers of plots of land from larger units from the payment of land conversion tax.
Clause 18 relates to consequential amendments

Four Acts are amended, namely the Employment Rights Act, the Land (Duties and Taxes) Act, the MCIA Act, and the VAT Act.
The Employment Rights Act is amended to cater for a new situation regarding the employment of seasonal labour. An issue that I have already dealt with when examining the SIE Act.

The Land (Duties and Taxes) Act is amended to include LCR in the definition of the term “property”. This will allow the holder of such a property to be exempted from land transfer tax and registration duty whenever a LCR is transferred in an intra-group situation. Such a benefit accrues to numerous assets, tangible and intangible, of a group.
The MCIA Act is amended in numerous sections.

– Firstly, in sections 4 and 5 to expand the powers and functions of the MCIA in many respects such as biomass energy production, enhancement of competitiveness.

– Secondly, in sections 8 and 9 by fundamentally reviewing the Board so that it becomes lean and definitely more efficient. The Board of the ex-Mauritius Sugar Authority which was so efficient and effective is being emulated.

– Thirdly, the MSA is once again emulated by re-establishing the Advisory Council with a very broad reaching membership.

– Fourthly, in sections 25 and 28 to allow for the movement of syrup from one factory to another. This is likely to be an occurrence in the future.

– Fifthly in section 47 regarding the contribution paid by distiller bottlers. The contribution is being extended to imports of rum, operators refusing to pay are being brought into the fold and payments are being limited only to molasses being used locally.

In the fourth amendment, bagasse and molasses are moving from the status of VAT exempt items to that of zero VAT.

In clause 19 provision is made on savings regarding the FORIP which is being phased out and replaced by the SPRP.

Clause 20 provides for the proclamation of the different sections of the Act at different dates.

My Ministry had extensive consultations with all the stakeholders in the sugar cane industry on the proposed amendments.

I personally chaired a number of meetings and I must say that I was impressed by the high level of the discussions and the valuable proposals and suggestions made.

I would have liked to take all these on board but unfortunately this has not been possible. I would, therefore, wish to commend all the people who actively participated in the discussion, and I thank them for their positive contribution.

I am sure that Honourable Members on both sides of the House have fully appreciated the difficult situation in which the sugar cane industry is finding itself today.

There is indeed an urgent necssity for appropriate remedial measures to be taken to put the industry back on track with a view to ensuring its sustainability and viability.

I hope that there will be unanimity for this Bill to go through and I appeal to all stakeholders to see the global picture in these times of danger and not to think of short-term personal interests.

In any case, Government will take all its responsibilities to ensure the full and comprehensive development of the industry.
With these words, I commend the Bill to the House.”

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