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Sugar Industry Amendment Bill 2003
EXPLANATORY NOTES
GENERAL OUTLINE
Short Title
The short title of the Bill is the Sugar Industry Amendment Bill 2003.
Objectives
The primary policy objectives of the Bill are to amend the Sugar Industry Act to:
! Require a Mill owner to provide reasonable notice in the event of a mill closure to
allow growers and millers to make other arrangements for the processing of the
crop or, in the event of having no viable alternative to milling the crop, a clear
determination of options they need to pursue in the future.
! Remove the Ministerial direction to Queensland Sugar Limited to give a price
direction for the sale of domestic sugar. This is a necessary change to allow for a
more competitive price to be determined for sugar sold at the domestic level.
! Establish a mechanism for an exemption application to be made to QSL to
manufacture products, including sugar that won t interfere with QSL disposing raw
sugar at the best competitive price available. This enables the industry to depart
from the traditional product of crystal sugar to look for new initiatives to reduce
the industries reliance on the greater proportion of trade going to world markets,
which are volatile and can have a severe impact on the returns to industry.
! To ensure that growers receive their just entitlement for producing a crop that is
manufactured by sugar mills into crystal raw sugar and other products.
Reasons for the Bill
The amendments proposed within the Bill will enable the industry to position
production in a variety of ways in the market place while providing improved security
and understanding to those participating in the industry.
Sugar Industry Amendment Bill 2003 1
Estimated administrative cost to government
The Bill has no cost implications for government.
Consistency with Fundamental Legislative Principles
The legislation has been prepared taking into consideration fundamental legislative
principles.
Consultation
Consultation has been held with industry groups including CANEGROWERS, the
Australian Cane Farmers Association, Queensland Sugar Limited, Australian Sugar
Milling Council and cane growers across regional Queensland.
The Office of Queensland Parliamentary Counsel has prepared the Bill.
NOTES ON PROVISIONS
PART 1-PRELIMINARY
Short title
Clause 1 provides that the short title of the Act may be cited as the Sugar Industry
Amendment Bill 2003.
PART 2- Commencement
Clause 2 provides that Sections 1 to 5, 7 (2) and 8 commences, or are taken to have
commenced, on the earlier of the following days- (a) the date of assent, (b) 15 April
2003 and the remaining provisions of this Act commence on the date of assent.
PART 3- Act Amended
Clause 3 provides that the Act amends the Sugar Industry Act 1999.
PART 4- Replacement of s 82 (Closure)
Clause 4 responds to the issue of mill closures by inserting Section 82 to enable a mill
owner to close a mill in any year. This will occur only after the crushing season for
that year ends; and only if the owner has given notice to each grower whose cane
production area relates to the mill (an affected grower ) of the owner s intention to
close the mill after the crushing season ends.
Sugar Industry Amendment Bill 2003 2
The notice by the mill owner must state that the Mill owner intends to close the mill
after the crushing season ends; and can not be given after 1 May in any year. If the
mill owner closes the mill in contravention of this section, the owner is liable to each
affected grower for any loss suffered because of contravention. However, the liability
to an affected grower is subject to any agreement between the owner and the affected
grower.
The closure of mills in the industry has generally been brought about by a number of
economic constraints that has forced them into this position. Milling throughput is
essential for the viability off the operation to be maintained. Although a range of
technological advances have been made the levels of profitability depend on
managing the number of tonnes that can be crushed and the investment made.
Because the industry is dependent on a high proportion of its raw sugar being
disposed of in the world market the capacity of the infrastructure for the Mill but also
the tramway and or road transport systems need to be run as close as possible to the
operations full potential.
More than any factor the availability of sugar cane is the reason for the operations
profitability. Over a period of time the capacity of mills have increased, often to a
point where the requirement of the mill outstrips the ability of the growers to produce
sufficient cane for the mills viability to be maintained.
As a consequence in the past a number of mills have closed mainly because of low or
negative levels of profitability. Generally those cane growing areas have been
absorbed into adjacent mill areas to make the receiving mill more secure.
The industry is now facing a situation where the availability of suitable farming land
within a reasonable haulage distance from the Mill for often a range of reasons can t
be used for the production of sugar cane.
Road transport for up to 100 kilometres has been used in areas that are landlocked. In
a year when returns are reasonable this can be justified, but when prices drop as they
have in the last 5 years, long hauls can make the operation marginal.
When all options are exhausted in the supply of cane to a mill then consideration of a
mill closure may occur. Mill areas that are isolated and in excess of hundreds of
kilometres from an adjoining mill are extremely vulnerable as not only is the Mill s
future in doubt, but growers who have money invested in the land , ongoing crops and
infrastructure such as machinery are also affected.
The current legislation gives virtually no time for growers to make a reasonable
management decision with the assets of the cane farm if a mill closure takes place.
It is proposed that the Mill will have to give notice to the Minister by 1 May that it
intends to close at the end of the crushing season that year and by doing so indicates
that it will not be available to crush the following year s crop. It can be assumed that
if the Mill owners don t provide the required notice to the Minister by 1 May that the
Mill will be crushing the following year s crop.
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Should the milling operation go into liquidation compensation may not be a
consideration. This arrangement allows the growers to investigate the options of
approaching the adjoining or adjacent mill and the mill suppliers of the receiving mill
to make transitional arrangements. There is no doubt a significant upgrade of the
receiving mill would have to occur.
Difficulties may arise when there is no other milling operation within a viable
distance to deliver sugar cane for the closing mill s suppliers. In the event of this
occurring growers in the closing mill area would be advised no later than 1 May of
that crushing season that the milling operation intended to cease at the end of the
crushing season. At least the growers would know not to plant a crop for the
following year and not to fertilise their cane.
Should the proposed amendment be agreed to by parliament the retrospectivity of its
commencement would only apply as a result of delays in the parliamentary process.
PART 5- Amendment of s84 (Continuation of mill suppliers committee for
particular purpose)
Clause 5 amends Section 84 to insert a sub-section (4) that provides that the mill
suppliers committee s function is to represent the previous growers interests. For
example, if another mill is available for land included in the growers cane
production areas relating to the closed mill, the function includes helping them
negotiate cane production areas for the other mill.
PART 6- Insertion of new ch 3, pt 1, hdg- Part 1- Vesting of Sugar in QSL and
Marketing of Vested Sugar
Clause 6 provides the insertion of a new Chapter 3, before Section 100, Part 1-
Vesting of Sugar in QSL and Marketing of Vested Sugar .
PART 7- Amendment of s100 (Vesting of Sugar in QSL)
Clause 7 provides that after Section 100, a sub-section (1A) is inserted to state that the
sugar does not become the property of QSL if a vesting exemption is in force for the
sugar. An exemption from QSL will enable the industry to produce alternative
products and sugar, provided they don t interfere with the vesting interests in QSL of
selling crystal raw sugar.
This amendment doesn t automatically allow for the return to QSL reliance of
disposing of that exempted sugar in the event of market failure with it.
This clause also provides for an amendment that this Section is subject to Section
102A which relates to the security of payments to growers.
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PART 8- Insertion of new s102A
Clause 8 amends to insert a new Section 102A, Charge in favour of growers on
amounts payable to mill owner .
The security of payments for growers is becoming a contentious issue between
growers and millers. There is a need for clarification in the distribution of what needs
to be regarded as entitlements within the industry. It is fair and reasonable that there
should be a charge over funds that are to be paid to growers and the insertion of
Section 102A, sub-sections (1) to (5) delineates the appropriation of those funds.
PART 9- Insertion of new ch 3, pt 2- Part 2- Exemptions from Vesting in QSL
This Clause inserts Part 2- Exemptions fro Vesting Sugar in QSL and this is
provided through Sections 107A to 107L.
The ability for sugar cane to be used to produce products other than raw sugar will be
enhanced by the provision of this part in to the Bill. Currently, the growing and
milling of sugar cane goes into the production of raw sugar which is under the Act
and vested in Queensland Sugar Limited, who acts as the single desk seller of the
commodity.
Under the definition of sugar, provided for in the Act, it is possible to apply to QSL
now to use sugar in its various forms to make arrangements to purchase the sugar on
terms and conditions similar to a sale of raw sugar.
To facilitate the options that may be considered to manufacturing other products,
including the sale of raw sugar, the amendment through an exemption process with
QSL enables a range of products to be manufactured without involving QSL.
Through these amendments an application can be made to QSL to produce a
commodity from sugar cane that can comply with the definition of sugar. This will
allow for a range of products that would reduce the dependence of the industry on
growing and milling sugar cane solely for raw sugar production.
This set of amendments as in the current Act maintains the single desk status of QSL
when it comes to selling raw sugar to domestic and export markets. However, this
may enable the supply of sugar to a market that due to the mechanisms used by QSL
to facilitate the trade may not have made this worthwhile.
There are a range of products such as ethanol and plastics that could be made from
sugar cane. These products could reduce the industry s total dependency on the
production of raw sugar should they prove to be a more viable option. It will be the
responsibility of the owner of the mill or a grower whose cane production areas
relates to the mill to make this decision.
QSL through these amendments are provided with a set of guidelines, which will be
introduced in regulations, to make the final decision on granting the exemption to the
applicant. The intent of the exemption being provided by QSL is to facilitate the
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ability within the industry to go about producing a range of products other than crystal
sugar that may be more financially beneficial.
The application for an exemption must fully explain the aspect of the product to be
manufactured and any variance from the commodity produced could result in the
exemption being withdrawn.
As previously stated in the case of an exemption being granted by QSL, this section
doesn t automatically allow for a return to QSL by the applicant and a reliance on
them disposing of the exempted sugar in the event of market failure.
PART 10- Amendment of s124 (Minister s directions to QSL)
This Clause provides that after Section 124 (1), after powers , inserted is, other than
in relation to the pricing of raw sugar for sale to domestic customers .
The withdrawal of the ministerial direction on the pricing of sugar to Queensland
Sugar Limited has been an issue advocated by sections of the industry for some time.
This relates to export parity pricing of domestic sales of raw sugar. Raw sugar is sold
to refiners, confectionary, soft drink manufacturers and others by QSL who has all
sugar manufactured in Queensland from sugar cane vested in it at a price that it can be
purchased on the world market.
This doesn t consider the cost of freight, haulage charges or storage costs and that
may be incurred to the current arrangements when a transaction takes place between
QSL and a buyer of Queensland Sugar. Buyers of Queensland raw sugar would be
purchasing this commodity at a price comparable to the world price landed in
Australia.
The removal of the ministerial directive of pricing of Queensland Sugar would in
effect be providing for import parity pricing of raw sugar rather than the current
export parity pricing.
There are no tariffs paid on sugar that may be imported into Australia. Australia
enjoys some the cheapest sugar produced by the local industry of any country in the
world. This amendment won t change that, but will reflect a fairer outcome for the
sale of raw sugar to the domestic market.
PART 11- Amendment of s234 (Appeal to Magistrates Court)
It is the intention of this Clause to insert, after Section 234 (1), sub-sections (h) to (i)
that will provide for a person who has applied for a vesting exemption and who is
dissatisfied with a decision by QSL to refuse the application or a decision by QSL on
the exemption to appeal to the Magistrates Court.
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PART 12- Omission of s246 (Sugar price directions)
Clause 12 provides that Section 246 be omitted from the Act.
PART 13- Omission of s342 (Minister s directions to Queensland Sugar
Corporation)
Clause 13 provides that Section 342 be omitted from the Act.
PART 14- Insertion of new ch 10, pt 3- Part 3- Transitional Provision for Sugar
Industry Amendment Act 2003
Clause 14 inserts Part 3-Transitional Provision for Sugar Industry Amendment Act
2003 , providing that Section 344 applies to a direction given under Section 124 or a
direction under the repealed Act continued in effect under Section 322
From the date of assent for the Sugar Industry Amendment Act 2003, the direction
ceases to have effect to the extent it relates to the pricing of raw sugar for sale to
domestic customers.
PART 15- Amendment of schedule (Dictionary)
This Clause amends to provide for definitions of terms that have been referred to in
amendments proposed in this Bill
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