Crikey



Corporate welfare – a sweet deal for some

Crikey’s forthright stand on the Great Sugar bail out brought praise

and some bagging, but the situation is worse, there’s a large dose of

corporate welfare - yet again - from the Howard Government.

The $444 million sugar industry assistance package, to give it its

political name, is certainly a sweet deal for the industry, especially

all those government members in marginal seats along the Queensland

coast. But it’s also an example of corporate welfarism at its

John Howard worst.

In fact it’s the fourth lot of assistance to this industry since 1998

and takes the amount to well above half a billion dollars. The

question remains, can anyone explain why large companies such as CSR

and the Finasucre group of Belgium should have a chance to get their

hands on the money?

As details of the package are picked over, the section called

Sustainability Grant” is the one which should be causing taxpayers the

greatest aggravation. It is the largest single area of assistance.

The Sugar Industry Reform Programme 2004

(don’t you love a handout described as “Reform”) includes grants to

millers and growers of up to $146 million to help them through the

current financial crisis, so that they can take the necessary steps to

reform and adjust.

This is what the Prime Minister’s statement said on Thursday:

The Australian Government will pay the sustainability grant in two

instalments to all operating growers and mills, with the first

instalment planned for June 2004. Industry groups will be asked to sign

up to a Statement of Intent on behalf of the industry committing to

achieving real reform and restructuring before receiving the first

Sustainability Grant payments.”

There’s no break up of the $146 million between millers or growers, or

any information on just who will benefit. Will any of the mills

close up or merge? Highly unlikely given the regional nature of the

industry and the fact that the only rationalisers, CSR and the

Belgium-controlled Finasucre would find it hard for either ACCC reasons

or Queensland political parochialism.

Around 94 per cent of Australia’s sugar is grown and milled in

Queensland so the overwhelming bulk of the $444 million will be paid

there. These are the millers operating in the Queensland Industry

according to the website of the State’s millers’ association:

Then there is the Hanwood co-operative on the NSW North Coast, milling

the NSW crop.

The grants do not apply to the refining side, on

the basis of the documents seen so far. In Queensland the grants will be distributed through Qld Sugar Ltd

under guidelines from Canberra. Qld Sugar will in turn make payments to

operating mills based on average production in the last three years.

These mills will then distribute these funds to their growers, based on

the division of funds between growers and mills over the previous three

years.

A similar arrangement will be made in the smaller states of Western Australia and NSW.

Complex yes, but before getting to the big guys, a point about some of

the Co-Op mills. They are owned by the growers in their respective

districts. So the growers will be getting money in two ways. From the

mills direct and money held by the mills as their share of the payments

from Qld Sugar. This fits in with the strength the growers and

their corporate entities have in some areas of coastal Queensland.

But as corporate entities, you’d have to ask why the mills are getting

money in any case? These mills are on the same footing as the big

blokes, CSR and Bundaberg (Finasucre of Belgium). Part of the

answer is that the owner-growers are quite often powerful in the

National Party in their area and in the influential Queensland

Canegrowers group, one of the best connected bodies in conservative

politics in the state.

CSR says it’s responsible for about 40% of the nation’s raw sugar

output. As well, the company has a 50% interest in refined sugar joint

ventures, which are the leading suppliers in Australia and New Zealand.

Under Queensland state legislation, sugar produced by Queensland mills

is acquired by the industry owned marketing company, Queensland Sugar

Limited (QSL). QSL sells the sugar to a range of domestic and

international sugar refiners. Major export destinations for Australian

raw sugar are Japan, Korea, Malaysia, New Zealand and Canada.

In a statement CSR CEO, Alec Brennan, welcomed the package and in part

said, “we are committed to do what we can to ensure a sustainable sugar

industry into the future and remain confident that with the support of

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