The Fiji Sugar Corporation (FSC) is facing scrutiny after an October 2018 board paper has come to light, detailing significant financial challenges linked to the Sugar Technology Mission (STM) mill upgrade organized by the Indian Government. This document, authored by former CEO Graham Clarke and CFO Manoj Kumar, reveals that the STM project did not fulfill its intended objectives, leading to ongoing detrimental effects on FSC’s operations.
Originally, FSC proposed a $220 million upgrade plan targeting their four mills—Lautoka, Rarawal, Labasa, and Penang—in 2003. However, the corporation chose a $115 million offer from STM, which ultimately covered only three mills. The board paper highlights that the equipment and materials introduced during the upgrade were often substandard, and the project’s management and oversight were lacking.
The financial fallout from these missteps has been severe. By May 31, 2010, costs associated with the STM project soared to $118.7 million, with additional expenditures nearing F$118.9 million accumulated over five years due to poor project implementation. This mismanagement raised the operating cost per tonne of sugar significantly and resulted in an estimated loss of around $108.2 million in potential revenue for the FSC.
The board paper raises concerns about insufficient project supervision, escalating costs associated with hiring Indian expatriates to operate poorly managed mills, and the absence of a training program for local employees. It points out deficiencies in project management and transparency, suggesting that the individual overseeing the project wielded undue control without appropriate oversight.
However, amid these challenges, there is a sense of optimism for the future. FSC is dedicated to improving its operations and has indicated that they will use the lessons learned from the STM experience to guide future initiatives. The emphasis will be on upholding engineering and quality standards rather than simply focusing on cost.
Furthermore, FSC’s recent financial performance shows a positive trend, with increased revenue and profitability suggesting a path towards recovery. By prioritizing sound management practices and accountability, the corporation aims to overcome the existing challenges, bolstering Fiji’s crucial sugar industry.
The board’s call for enhanced accountability and better governance in light of these issues is vital, as stakeholders envision a more sustainable and resilient future for Fiji’s sugar sector.
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