Bangkok, Nov. 16 - The Thai government's Office of Cane and Sugar Board is looking for ways to improve regulation of the domestic sugar and cane industry in order to improve the overall industry and its competitiveness in global markets, the agency said Friday.
The Cane and Sugar Board - the core body overseeing the sugar industry in Thailand - is studying ways to improve a benefit-sharing arrangement between sugarcane growers and millers as well as a quota system among cane growers, the board said in a statement.
The board has come under heavy political pressure when it has set pre-season and post-season prices for many years now, but there have been little or no changes in the way the industry is run.
Pressure from growers and millers is high again this year due to a decline in global prices.
Under the current benefit-sharing arrangement, growers that supply cane to mills receive 70% of the income while the mills retain the other 30%.
However, a quota arrangement in which growers sell to local intermediaries known as 'the heads of the quota' has raised concern among market participants that the benefits won't reach the growers, the statement said.
The quota, the benefit-sharing system and other regulations are too inflexible and they prevent Thailand from competing effectively with other countries in the global sugar market, market participants were cited as saying.
The quota system is applied to sugar mills, but it isn't in official regulations.
The Thai government has been supporting sugarcane growers by providing them loans to help them get higher payments for their crops. Consequently, while the assistance that reaches cane growers is limited, they have accumulated heavy debts, the board said.
The government intends to revamp the industry to help reduce the debt burden, it said.
Officials from the Industry Ministry and the Cane and Sugar Board will together brainstorm with sugar millers and growers to seek the best alternatives for the industry, the agency said.
In an initial move to tackle the problems, the Thai government has lifted the retail sugar price by THB3 a kilogram to THB16.75/kg for regular white sugar.
The preliminary cane price for the 2007-08 crop year has been increased to THB600 a metric ton, from an earlier THB450/ton, but still below the THB800/ton offered last crop year due to declines in global sugar prices and a stronger baht, the agency said.
"Lifting the (preliminary) price of cane for this crop year to THB800/ton would cost the board about THB19.6 billion more," Ratanaporn Chuengsanguansit, secretary-general of the Cane and Sugar Board, said in the statement.
The preliminary cane price, which sugar mills pay growers, was set based on an average global sugar market price of 10.60 U.S. cents a pound.
Meanwhile, the Thai Ethanol Association said it was pushing for the government to develop and use cane as an alternative energy source, which would help reduce the amount of cane used to produce sugar.
Thailand is Asia's largest sugar exporter and one of the top three sugar exporters in the world.