SPU’s molasses production plan ‘a pie in the sky’ – Ramsaroop

…as SPU head defends reason for reopening Enmore factory

Though the Special Purpose Unit (SPU) has an ambitious plan to produce molasses for both local and regional companies that have a demand for this by-product of sugar, Economic Advisor to the Opposition, Peter Ramsaroop said the prospects of selling molasses to this lucrative market is a “pie in the sky”.
In making reference to a recent article published by this newspaper, where SPU Head Colvin Heath-London revealed that the sugar industry could now tap into the Caribbean rum industry due to the high demand based on damages caused by hurricanes, Ramsaroop said it is an unrealistic plan.

“What Heath-London failed to acknowledge in his public commentary is that (Demerara Distillers Limited) DDL made a decision to invest in the factory in order to preserve its own world-renowned industry and its fate. It would be uncompetitive for DDL to now have to import its molasses for its rums,” he explained.
According to Ramsaroop, the Guyana Sugar Corporation (GuySuCo) will barely, by its own projection, meet the molasses demand for DDL, which has a shortfall of in excess of 27,000 tons of molasses.
“Where exactly is GuySuCo getting molasses from, to consistently supply the more than 15 world-class distilleries already competing with DDL, which just advanced hundreds of millions of dollars to the SPU in order to protect its own supply of molasses?” he questioned.
The financial adviser reasoned whether Heath-London is now trying to say that GuySuCo intends to increase sugarcane production by millions of tons, even when it is publicly known that Government has been closing sugar estates and scaling back production annually.

Ramsaroop argued that GuySuCo has set for itself, a target of 115,000 tons of sugar for this year, down from 188,000 tons in 2016. He said it is also important to note that 100 tons of sugarcane, under ideal conditions, yields 10 tons of sugar (GuySuCo actually gets between six to seven tons), while at the same time leaving about three tons of molasses as a by-product.
“What this means, is that in order for GuySuCo to meet its already meagre target of 115,000 tons of sugar, it will need to produce about 1.15 million tons of sugarcane. The by-product from this will barely satisfy DDL’s demand for molasses, said to exceed 27,000 tons – molasses for which DDL has already paid for in advance, through its agreement with the SPU,” he further stated.
The economic adviser to the Opposition therefore questioned whether based on the statements made by the SPU head, it would mean that GuySuCo has plans to increase sugarcane cultivation and production ten-fold, in order to sell molasses to the Caribbean market.

Defence
However, despite these arguments, Heath-London defended the reason for reopening the Enmore factory to produce molasses, although it is being suggested that it is an impractical task. He told Guyana Times on Tuesday, “They have to keep the estate going. Like a car, nobody is going to purchase a car if they know it isn’t working. So, we have to keep the estate going. DDL needs molasses and so we are doing that.”
While some politicians and former policy makers, including local economist Ramon Gaskin have said that reopening of Enmore to produce molasses for the company’s operations is not economically feasible, the SPU head said he does not agree with that theory, explaining that Enmore is not operating at a loss.
“I don’t agree. You have to realise that crystallisation process in a sugar mill is where most of the money is spent – the high cost profit. And that forms a major part of the manufacturing cost or the whole crystallisation process. We will not be crystalising, we are just doing normal work and inversion method.”
Heath-London claimed that the factory is using up about a quarter of the energy needed. In fact, he said the operation cost is much lower and at the same time, the molasses cost is much higher. He also rubbished claims that DDL is getting molasses at a subsidised cost. While he did not disclose the prices that GuySuCo is selling their molasses to DDL, he explained that it is at market cost.
At present, A grade molasses is sold at a premium price of US$200 per ton while the price for normal molasses is somewhere between US$100 and more. “Their rates are based on the quality of molasses they get and you have to remember at Enmore, normally GuySuCo gives DDL what is called black strap molasses which is molasses when you extract most of the sugar from. The molasses that Enmore is producing now is called high tech or Grade A and that sells at a premium,” he added.