THE GOVERNMENT has allocated an additional half a billion dollars to the loss-making Sugar Company Jamaica (SCJ) for the current fiscal year.

But Christopher Tufton, agriculture minister, says the money, which brings this year's grant to the SCJ to $1.3 billion, is to finance social-intervention projects in communities where the positions of thousands of workers have been made redundant, rather than for running factories still owned by the SCJ, ahead of their divestment.

"The divestment process involves some amount of social intervention for the workers at the local level," Tufton told the Financial Gleaner yesterday. "That (additional) money is for the (sugar transformation) unit that manages that programme."

The SCJ, with liabilities of more than $18 billion, is among the loss-making entities which the Golding administration has been attempting to offload.

In fact, it has sold three sugar factories - Duckenfield, Long Pond and Hampden - to Jamaican interests and is in negotiations with an Swiss-based Italian-owned firm, Eridania Suiss SA, to sell two others, Barnard Lodge in St Catherine, and Monymusk in Westmoreland. The administration hopes to conclude that sale by yearend.

"We should know, either way, by December," Tufton said.

Concurrent with its divestment talks with Eridania, the Government struck a separate deal with with the firm to purchase 79 million metric tonnes of sugar to be produced by SCJ during the harvest, starting later this year. The Italian company will put upfront, US$15 million of the US$37.7 million - based on the minimum €335 per tonne it is committed to pay for the commodity - to be used as working capital.

However, Tufton explained that the additional $553 million to SCJ, contained in a revised Budget tabled in Parliament on Tuesday, had nothithing to do with that deal. There were suggestion that additional working capital, beyond Eridania's outlay, was required to take off the sugar crop. In fact, industry officials had suggested that it would take up to US$39 million to produce the 79,000 tonnes of sugar.

"We have structured the programme so that we can do that out of cash flow," Tufton said, explaining that the interim company that has been established to run the factories had so far drawn down only US$10 million of the Eridania cash.

The expectation is that by the time SCJ starts to supply sugar to Eridania in December for sale in European Union (EU) markets, it will be largely coincidental with the due date for initial bills.

"By December we should should start exporting and cash should be coming in," Tufton said.

However, the sugar divestment demanded not only that the Government embrace the SCJ's old liabilities, which have been parked in a vehicle called SCJ Holdings, but required that around 7,000 workers, mostly in poor rural communities, being made redundant. Less than half of those have since been re-hired.

It is in part to address the the economic and social dislocation caused by these redundancies - under a project supported by the EU - that the Government made this latest allocation.

"We are addressing roads, community infrastructure, retraining and so on," Tufton explained.

The EU, which has been lowering guaranteed price and other preferential treatment for sugar from Jamaica and other African Caribbean and Pacific countries, had pledged €30 million for the project over several years.

business@gleanerjm.com