Gov't to decide the fate of Polski Cukier, sugar privatization
Union leaders and parliamentary deputies involved in negotiations over the future of the sugar industry said last week that the government would be ready to announce plans for the creation of domestic holding firm Polski Cukier as early as this week.
"We expect that that decision will be made (this) week," said Adam Biela, an AWS deputy involved in negotiations with the government. "Right now analyses are being carried out as to the profitability of the whole enterprise."
The sugar industry is mired in controversy over how to move forward with its privatization. Two plans have emerged: to sell some mills outright to foreign investors, or take as many as 16 domestic companies and piling them into one cooperative called Polski Cukier.
Faced with debts reaching upward of zl. 1.7 billion ($415 million), the sugar sector's privatization must move forward quickly if the industry is to remain strong. While Poland is the third-largest sugar producer in Europe, individual mills are in danger of going bankrupt if they do not receive much-needed capital.
In an effort to keep the sector in domestic hands, since last summer union leaders and Solidarity Election Action (AWS) deputies have been pushing for a halt to the sale of sugar mills to foreign investors and have pushed instead for the industry to remain in Polish hands through Polski Cukier.
The conflict over the sugar sector spilled over into national politics last month and in part led to the no-confidence vote faced by Treasury Minister Emil Wasacz on Jan. 22. In the days prior to the vote, many AWS deputies equated their vote on Wasacz to a change in policy on sugar privatization.
During the heat of the debate on Wasacz, AWS deputies were swapping votes of support for the Treasury Minister in exchange for a guarantee that Polski Cukier would be born.
An announcement in daily newspaper Rzeczpospolita last week advertising a tender for an adviser for Polski Cukier seemed to confirm that AWS had secured its guarantee. According to the ad, a study on the viability of Polski Cukier would have to be completed by May 31.
Where Polski Cukier leaves the government's plan to sell mills to strategic investors is unclear. Under the original proposal, the largest of four Polish sugar holdings, Slaska Spolka Cukrowa, would be sold off in its entirety by March this year to foreign investors. The remaining three sugar holdings would be broken up and sold off in small groups of mills later in the year.
Progress on Polski Cukier could mean that the government is now taking a two-tiered approach to privatization. In the days leading up to the vote on Wasacz, union leaders had received guarantees that 16 mills would be handed over to Polski Cukier. That number would allow the government to go ahead with its own privatization plan by selling some of the larger holdings.
The government last week confirmed that Slaska Spolka Cukrowa's sale would move forward. "That holding is removed from the issue of creating Polski Cukier," said Maciej Chojnacki, a coordinator in the Treasury Ministry's press office.
But the government may not be able to move forward completely with its own agenda and fully satisfy the demands of Polski Cukier advocates. At the heart of the issue is a question of production limits. The Agriculture Ministry has set a total production quota of slightly more than 1.6 million tons for the entire sector for 2000-2001. The government regulates how much each mill, or grouping of mills, can produce to keep sugar prices stable.
In negotiations with the government underway last week, union leaders and deputies fighting for Polski Cukier were trying to up the ante by increasing how much the cooperative would be able to produce. At present the government is considering shifting Polski Cukier 16 mills that have combined production quotas of 400,000 tons, approximately 25% of all sugar produced in Poland. Union leaders and deputies say that more than double that quota would have to be assigned to the enterprise for it to be profitable.
"For Polski Cukier to exist, it has to have pretty high limits," said Zdzislaw Pupa, an AWS Sejm deputy who backs the idea of Polski Cukier. "That means about 1 million tons."
Granting such high quotas to Polski Cukier would drastically cut back how much individual mills which would be slated for sales to foreign investors could produce. That reduces those mills' attractiveness, observers said, and may result in little foreign interest. In the end, some of those mills could also end up as part of Polski Cukier.
"(A quota) of a million would mean you would effectively stop where you are now and put (everything) into (Polski Cukier)," said Stanislaw Dziedzic, director of business development at British Sugar, one of the parties interested in the privatization.
Trade union leaders who support the Polski Cukier concept also have been looking at the quota issue, and are worried that the government may favor mills for sale and leave the domestic cooperative with little production capacity.
Roman Wierzbicki, head of the solidarity union for individual farmers, has previously called for sugar workers to organize sit-ins at holding headquarters in Zamosc and in Torun to protest in favor of higher quotas.
But the Polski Cukier concept is not backed by all farmers or sugar-sector workers. With the start of the protest at the holding in Zamosc three weeks ago, workers supporting the sell-off of part of the holding to German firm Sudzucker have been holding their own counter-demonstration.
