Sugar factory closure 'needless'

 

The closure of the Mallow sugar factory, Ireland’s last, was “needless” because the business was profitable at the time, EU auditors have found.

Some 320 workers lost their jobs when Greencore shut the plant in 2006 under an EU Commission scheme to eliminate unprofitable sugar production. In a new report on the initiative, the European Court of Auditors strongly implies that it cost more to close the business than it would have to keep it open.

Referring to Ireland without naming the country or the Mallow plant in particular, the report noted that it was the only national producer and had undertaken a rationalisation of its operations before the reforms were introduced.

The report found that the producer justified its decision to close this large, modern and “potentially efficient” operation — which defined itself as one of Europe’s most efficient producers — due to the risk of lower prices reducing the supply of sugar beet to an uneconomic level.

“Without sugar reform, it’s quite possible that the sugar factory in Mallow would exist and sugar growers would be growing,” said Eoin O’Shea, Ireland’s member of the Luxembourg-based audit body.

Asked if the plant’s closure was needless, Mr O’Shea said that was “the inescapable truth of the court’s report.”

The report examines a scheme to restructure Europe’s sugar industries in the light of a World Trade Organisation ruling which found EU sugar subsidies illegal because they resulted in surplus supplies being dumped on world markets.

“Whereas the aim was to create an incentive for the least competitive sugar producers to give up their quotas, quotas were also abandoned by competitive factories,” the court said today.

“There is an increased dependence on imports while there are doubts as to whether the fall in prices will be passed on to final consumers and delays persist in implementing diversification and environmental measures.”

The report follows a special examination of the scheme by the court, which periodically audits specific EU policy initiatives. According to its findings, no comparison of the productivity of individual producers or factories was available when the scheme in preparation.

“The impact assessment merely referred to studies which have ranked the sugar-producing regions according to the combined profitability of growers and producers, categorising the regions as: low, medium and high combined profitability,” the report said.

“The ranking was based on 2001 data for the EU sugar industry. However, the data had not been updated when the Commission made its proposal in 2005, notwithstanding that certain significant changes had taken place, such as increases in sugar beet yields in Spain and the UK and producer consolidation/rationalisation in Ireland.”

There was no comment on the report from Greencore. Direct closure costs of €172 million were incurred, the report said. In its report the court said this compared with the availability of €127 million in restructuring aid, implying closure costs of some EUR45 million in excess of the available EU aid. In essence this means it would have been cheaper to keep the plant open.

However, litigation around the compensation for the closure centred on a restructuring package worth a total of €147 million. In 2007 the High Court quashed a Government decision to allocate €98 million from that package to Greencore as compensation for the surrender of the State’s sugar quota. The Government wanted the €47 million balance to go to sugar beet farmers and contractors.

Greencore maintained it was entitled to 90 per cent of the EU compensation or €131 million. The Government ultimately decided not to appeal the High Court ruling.