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Wastage, Politiking, put Caroni In $$ Dilemma

January 27, 2002
By Raffique Shah

FORGIVE me if I take this as a personal insult to both my intelligence and integrity, but I refuse to allow the Board of Directors of Caroni Limited and the ex-UNC government to sully the characters of 15,000 sugar workers and cane farmers. To have the nation believe that these stakeholders of the ailing sugar industry are responsible for the sorry financial state of the company is unacceptable. Worse, to threaten closure of the industry because of the mountain of sins committed by both the former government and those responsible for running Caroni between 1992-2002, is indefensible.

According to new Agriculture Minister John Rahael, the Board had budgeted for fiscal 2001-2002 for a government subvention of $500 million. The UNC government allocated $144.5 million to the company, $35 million of went towards repayment of a loan, leaving $108.5 million to run Caroni between October 2001 and September 2002. Bear in mind that the company's revenue from selling an average of 90,000 tonnes of sugar is around $225 million. Rahael also revealed that the company's current debt stands at close to $2 billion-probably the biggest debt stock for any organisation outside the central government.

Before I make my case for a forensic audit of Caroni's finances (or lack thereof), I should add some additional information so that readers who know of Caroni only through its notoriety for gobbling up state funds, will be better informed. Just over 7,700 persons are employed directly in Caroni's sugar operations, of whom 5,000 are paid to cultivate and harvest under 600,000 tonnes of canes. Another 2,000 are employed in the two factories and ancillary operations (transport, maintenance, etc.), while 1,100 are in administration. Caroni is also responsible for 800-odd persons employed in money losing operations like citrus, rice, dairy and beef production, while 90 are at the distillery, the only division that is capable of making a profit.

In addition to the above, 6,000-plus cane farmers grow and sell over 600,000 tonnes of canes to the company, which is just under 60 per cent of the overall tonnage of canes produced in the country. Readers should note that in 1992 the PNM government wrote off a $2 billion debenture Caroni had carried on its books for many years, virtually giving the company a clean financial slate to continue operations. In less than 10 years, Caroni has not only re-incurred a similar debt, but it has absorbed somewhere in the region of $2 billion in government subventions.

If we assume that of this year's projected revenues and subventions ($775 million), $100 million was meant for capital investment (replacing obsolete equipment, etc.), that would leave $665 million for operations. Cane farmers, if paid at the current prices ($170 a tonne), will net around $110 million. So the Board and management of Caroni wanted around $555 million for operating expenses for the fiscal year. If they were given that, it would amount to an average of $72,000 per employee for the year-far more than what 90 per cent of them earn.

This begs the question: what did the Board have in mind when it requested $500 million in subvention? And why did the UNC government aid and abet a Board that was running Caroni into the ground, either through lack of vision or gross incompetence? Let me recount some actions taken by the Joe Ramkissoon led Board that helped put the company in its present finincial straightjacket. In 1997, the Board and management, in spite of warnings from organisations like mine (TICFA), ordered the use of Metharizium for froghopper control: the result was a disastrous 1998 crop (I believe we barely exceeded 70,000 tonnes of sugar). In the process, Caroni lost more than $75 million. Not a board member or manager was questioned, far less fired or jailed, for that fiasco.

About four years ago, Caroni purchased a new mill for the Ste Madeleine factory from Dhanpur Sugar Mills of India. The cost was $22 million. The mill was the source of multi-million-dollar operational problems up until last crop, by which time a considerable additional sum was spent to get it going. Again, no inquiry. Caroni also spent $15 million to upgrade its information systems: when the "upgrade" was completed, it could not function properly, and Caroni had to resort to its old systems. Another $5 million was spent to upgrade the company's telephone system: after the upgrade, operating costs increased by close to $250,000 a year.

The Livestock Division lost more than $20 million over the past few years. After an expensive exercise authorised by the Board, the division continues to lose money. There is need for a public inquiry into how much of the company's valuable landholdings was donated, leased or sold at ridiculously low prices to politically-connected individuals and organisations. And even as some vultures were pecking away at the land, farmers and workers who are entitled to either agricultural or residential lands through age-old tenancies, face many hurdles before they get leases or titles to their plots.

There are many other dubious deals that Caroni was involved in over the past six years. This company, which says it cannot afford to buy a $25,000 scale to weigh farmers' canes, expended considerably more on lavish long service ceremonies that gave then Prime Minister Basdeo Panday another platform to play politics. Its involvement in many politically tainted projects, using company money, equipment and personnel, is well known by those in the industry. It is not surprising, therefore, that a relatively small external debt (around $300 million, I believe) in 1995, could turn into a $2 billion monster five years later!

And throughout this, Panday failed to act against the Board. This Board fired senior managers without cause, and ended up paying them substantial sums for wrongful dismissals. But defying cries for investigations into the company's operations and firing or jailing those who were culpable, Panday retained the same Board for the six years the UNC was in power. Then, when the mess hit the fan, he had a committee appointed that advised him to shut down the blasted company!

Point is, Caroni can be turned around to be less dependent on, even independent of, the Treasury. But no government has had the guts to make the hard decisions that are necessary, primarily because it would hurt Panday's union. But nothing short of a thorough inquiry into Caroni's operations, particularly in relation to its finances and divestment of land, will suffice. In the meantime, though, the PNM Government must find the funds to keep Caroni and the crop going as we prepare to make radical changes in short time.

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