The administration of Denzil Douglas has long been wrestling with the decline of sugar

The St. Kitts and Nevis government has signalled that it is scaling back the once dominant sugar industry.

In outlining its programme for the new term of parliament, the administration of Prime Minister Dr. Denzil Douglas said plummeting prices and spiralling debt had forced it to restructure the industry and change its focus.

"We must accelerate the implementation of my Government's transition programme with a view to moving the industry away from the production and export of sugar at the end of next crop," Governor General Sir Cuthbert Sebastian said as he delivered the throne speech at the opening of the National Assembly on Thursday.

From next year, the state-owned St. Kitts and Nevis Manufacturing Corporation (SSMC), which manages the industry, will concentrate on the manufacturing of sugar and the production of a range of other agricultural products and services. Some of its services will be privatised.

Quota

The SSMC currently has debts totalling EC$307.6 million (about US$114 million, which the government partly attributes to depressed sugar prices and high production costs.

The corporation says it loses US$934.30 for each tonne of sugar produced and sold as part of quota arrangements with the European Union, to which St. Kitts and Nevis sells most of its sugar under guaranteed terms.

It is estimated that in 2002/2003 the production cost of sugar was US$1,458 per tonne while the EU quota price was US$523.70 per tonne and the world price of sugar was US$155.00 per tonne.

And the outlook for the industry remains bleak because of promised reforms in the EU that threaten to result in deep price cuts.

"Each year the sugar industry contributes about 4% of gross domestic product to the public debt, and if the industry continues in its existing form, as the sugar prices fall even further this percentage would rise and could threaten the fiscal stability of the entire country, Sir Cuthbert warned.

The industry directly employs about 1000 people while another 5 000 depend on sugar indirectly for their livelihood.

Sugar has been dominant in St. Kitts for centuries

There will be job losses although the government did not say how many.

It has however pledged that displaced workers will received adequate redundancy notice, statutory compensation and retraining.

The government said it was already investigating ideas for intensifying agricultural diversification.

These include the production of animal feed, the co-generation of electricity, and the production of ethanol and alcohol based products including rum.

The economy of St. Kitts and Nevis has been dominated by the production of sugar since its introduction in the 17th century, but its importance has declined consistently since the 1980s.

In 1960, Nevis stopped growing cane sugar, but it remains the dominant crop on the larger island of St. Kitts.

By 1987 tourism had surpassed sugar as the major foreign exchange earner for the two-island federation.

Current annual production is 25 000 tonnes of which 15,590 is contracted to the EU.