Committee Reports > List of Committees > Joint > 1980 > Committee on Commercial State-Sponsored Bodies > Report No. 13 - Comhlucht SiÚicre Éireann, Teoranta

MIONTUAIRISC NA FIANAISE

(Minutes of Evidence)

Dé Céadaoin, 14 Bealtaine, 1980

Wednesday, 14 May, 1980

COMHLUCHT SIÚICRE ÉIREANN TEORANTA

Mr. Maurice C. Sheehy, Managing Director and Chief Executive, Mr. Christopher K. Comerford, Group General Manager and Deputy Chief Executive,Mr. John D. McCarthy, Group Financial Controller, Mr. John F. Hughes, Company Secretary and Mr. Tony Brown, Economic Adviser, of Comhlucht Siúicre Éireann Teoranta called and examined.

Chairman.—We shall have two sessions. Today we are dealing with company objectives, sugar operations, sugar pricing policy, organisation and personnel and the agricultural trading division. We shall take the remaining items on Wednesday next.

The procedure, Mr. Sheehy, is that the members of the Committee will direct their questions to you and you can deal with them yourself or hand them on to any member of your team. Certain items may arise which you feel are confidential. If you feel that, just say so and they can be dealt with later by way of a written memorandum. Do you want to make any statement in advance?

Mr. Sheehy.—No, except to say that we welcome the opportunity of meeting you and that the company wholeheartedly wishes to co-operate with your work. If there is any information we have not got here it may be made available to the Committee afterwards.

1. Deputy B. Desmond.—A very general question. It is 47 years now since the Sugar Manufacture Act was passed by the Oireachtas, apart from the amending Acts of 1962 and 1973. Since that time the Sugar Company has diversified a substantial proportion of its work. One of the things which has preoccupied members of this Committee in relation to all the State-sponsored bodies with lengthy histories, such as yourselves, is to have from you any particular view as to why the diversification occurred;- what was the conscious philosophy behind the diversification in such companies. It happened substantially in Aer Lingus. But in your company you have had considerable diversification. It is a question we generally put to State-sponsored bodies where there may be some problem on our part in reconciling the original Act with their current activities.

Mr. Sheehy.—When the Act was passed originally the company was set up in an environment where there was an existing sugar company, privately-owned, but in common with sugar industries elsewhere in Europe at the time that company had to get a lot of State protection in order to keep it there. It was running at a very substantial loss. When the State company was set up it was given the task of establishing an Irish-owned sugar industry to supply the needs of the country. The fact that it got protection at that time was in common with what was happening elsewhere in Europe. In our case—I suppose because of the way things were developing in the country at that time—there were not the support services necessary for the industry. This spread across a rather wide area. For instance, the industry had to get personnel from abroad to start up and they were there for many years. As it developed and as the war years came the necessity for getting further inputs to support it became obvious. For instance, in 1939 and 1940, there was no beet seed to put in the ground and no means of getting beet seed from abroad. The company was forced into a situation, in order to keep a supply of sugar going during the war, to get involved in seed production, a necessary ancillary. This has now grown into a new diversification. The same applied in other areas. During the period of the war the company became involved in the supplying of the fertiliser needs to the industry, getting it where they could and rationing it out. It became involved in fertiliser blending, mixing and distribution. That grew and developed as the years went on.

In the early years also the yields were bad, certainly very bad by today’s standards. They have improved significantly in recent years but in those years they were bad. One of the main reasons for the bad yields was the acidity of the soil. The correction of that brought the company into the quarrying business and it commenced its ground limestone operations. In a similar way it became involved in agricultural engineering. There was nobody here making a range of agricultural equipment that met the requirements of the industry. The company felt the industry would probably have failed if the company had not undertaken the production of that equipment itself. Immediately after the war it became involved in developing equipment that was suited to the requirements of our own crop. That, in turn, grew. In order to make that possible economically we had to become involved in exporting the machines. We were, therefore, in our own engineering business. When the animal feed business was started people would not even take beet pulp or molasses. There was a big problem of disposing of those by-products. The company had to become involved in the development of that market. That is how we became involved in the animal feed business which we have at present.

Our movement into the food processing business was in response to a request from the Government who asked us to examine opportunities. They encouraged semi-State bodies to become involved in other operations. Having a strong base and a connection with farmers involved in the tillage sector, we went into the food business based on vegetables. That is how things have grown over the years. Everything sprang from the requirements of the sugar industry, in the first instance, and then moved into areas that were very close to it.

2. Chairman.—On page 11 of your submission you say that there is at present no formal statement of corporate objectives for the company as a whole. You also state that specific goals and strategies for the various operating divisions have been agreed and updated at various times as a basis for divisional planning and control. The submission also states that those have been discussed within the framework of general Board philosophy and in the context of understood constraints of public policy in relation to the role of the State sector.*

In the light of a document published today, what restraints or constraints would you consider the sugar company has been under over the years, or have there been any constraints? It appears from what you have just told us that you pursued a very flexible course of activities. Are you conscious of any constraints over the years?

Mr. Sheehy.—We are not conscious of any serious constraints. That is my reaction. The policies that have been developed have been so developed in consultation with Government Departments and Ministers from time to time. They would have been in harmony with the thinking of those people. Going through the history of the company, its annual reports and the comments of the Ministers’ nominees at the Annual General Meetings, one can see that agreement was expressed with the general thrust of change in the company over the years. With regard to our dealings with Departments we recognise that they work under their own constraints and have their own job to do but there has not been any serious constraint on us. We may occasionally have had to change direction but that was done in harmony with what was Government policy at the time. However, in no case could I say that that was a matter of serious concern.

3. Deputy Lawlor.—The main stream is obviously the sugar activity but are the diversification ideas put forward mainly as an offshoot of the main function or do you foresee in the future any viable commercial activity indirectly associated with agriculture as being an option or an opportunity for your company?

Mr. Sheehy.—We would not confine ourselves necessarily to things that would be directly linked with agriculture. We have a problem in that we have to modernise and update our industry. That will mean that in due course there will be less employment and that we will have to find other opportunities for people. We are involved in a search for further areas of diversification. It responds to and is in harmony with Government thinking. There was encouragement in that direction given a few years ago and we have made a major effort. We have not anything concrete to put forward at present but that does not say that we are not looking at possibilities. We have looked at some and rejected some. We have set up a department within the company with the responsibility of chasing new opportunities of business, either in our existing locations or elsewhere.

4. Deputy Kenneally.—In your submission you said you were involved in pharmaceuticals and chemicals. Is that correct?

Mr. Sheehy.—Yes, we were led into that because of the skills that are within the industry. The sugar industry, which is our basic one, is a chemical industry. Therefore, as it is a chemical process, we have chemists and engineers who have cetain skills in that direction. We regard that as a strength and those areas are ones we could exploit if we could identify an opening there. That is not the only area. We feel we have other strengths also.

5. Deputy Kenneally.—I should like to return to the Chairman’s question. There are no legal restrictions on you from the Department preventing you from going anywhere you wish, are there?

Mr. Sheehy.—In the legal sense, we are a company set up strictly under the Companies Act. The Minister, however, has the power to nominate certain directors, so he can influence the situation in that way. He is also the shareholder and has power in that way, too. We regard it as our role to operate in harmony with what is publicly known and understood as State policy at any given time.

6. Deputy L. Lawlor.—Getting down to your mainstream activity, my view, based on our Carlow visit, was that a fairly extensive capital investment programme was required to take the processing through the next 10, 15, 20 years. To what degree will returns justify that investment specifically, or is it necessary to have these other activities to support sugar manufacturing which, based on EEC policy, is becoming more difficult? You, at this stage, require tremendous capital investment and yet the return on sugar manufacture is probably at a very low margin, if profitable at all.

Mr. Sheehy.—On a national basis, if a sugar industry were not there at the moment, somebody would have to be thinking of putting one there. It is very difficult to identify any other way in which the nation can get such a return from the land so used. Even at the worst of times, we get two tonnes of sugar per acre and the equivalent, in animal feed, of an acre of barley from every acre under sugar beet. You are, therefore, talking, in terms of imports, of a contribution to national wealth of at least £850 per acre, and that is apart from employment and other advantages that go with it. On the overall national basis, there can be little doubt that there should be a sugar industry in the country.

It is true that the sugar industry does need very substantial capital investment at the moment. We have been investing pretty heavily in recent years, making up for, perhaps, a lack of investment in the past. That is not to say that the decision not to invest in the past was not right at the time. The situation has changed very radically since we went into the EEC. Traditionally, before that we were not making as much from our own home-grown beet. Over the past 10 or 12 years or thereabouts the yield of beet per acre has increased by about 50 per cent and even though the acreage might be marginally down this year, we still have an acreage that is within the four or five highest acreages ever planted in the history of the industry. We have at the moment a sugar quota of 182,000 tonnes. We have a problem of fairly long campaigns which some farmers at the moment do not like, with very good reason. It is nationally desirable to shorten these campaigns. We have, as a result, to aim at shortening them, while producing sugar in excess of home market needs, because there are export markets as well. We have to make up for the fact that there was not substantial investment in the past. As there is open competition now, with anybody within the EEC free to put in and sell sugar in this market, we must be able to compete, to hold that market. By reason of its configuration, the industry here has certain disadvantages. When it was founded in the first instance, undoubtedly there was a regional development aspect in it, which is why the factories are placed where they are. That leaves us today, even with the increase in output, with an industry with a daily through capacity on average not in the same league as the average of the other countries within the EEC. This is a big hurdle that must be got over. That needs capital investment and, tied into that, there are other key factors that one has to consider in terms of cost, where we would be out of line with the sugar industries in the other EEC countries. Many of these industries, long before we went into the EEC, were investing heavily and they were all protected. Each of the European countries protected its own industry. They were all developed in that environment and heavily invested in. We are coming in late on that and it is necessary for us to invest more heavily to preserve our industry.

7. Deputy B. Desmond.—Why was there a lack of investment in the past? It would appear to us, examining your balance sheet and your capital investment programme, that this time last year you had £70 million odd in assets but £50 million of that would be borrowed, with a minimal £6½ million in terms of direct shareholding by the State. Yet you are going ahead with a modernisation programme of £30 million. It appears to us, even from our superficial visits, that substantial additional capital investment is necessary. It also appears to us that, notwithstanding the solid name of the sugar company, the whole financial structure of the company seems to be seriously out of line with what one would expect, if I may put it that way, in a company of such magnitude. If I may return to my original question, why in the sixties or, perhaps, in the early seventies, was there not that kind of intensive structural capital investment?

Mr. Sheehy.—The amount of money put in by the State is less than we may even think. In the figure you quote there are some bonus shares included. Excluding these would bring it down another £1 million. During those years, the sugar industry was governed by a policy that one grew from native beet enough sugar to satisfy just the home market consumption. There were some exports beyond that sent to the United Kingdom in the form of confectionery goods. Chocolate crumb was a major item. Apart from the milk, sugar had to be available at the right price to do that. Under the arrangements then prevailing sugar going into the UK had to be at the dominion price. Therefore, we would have had to make available to our confectionery exporters sugar based on that formula. This resulted in it being necessary to get raw cane sugar, refining it here and supplying it to those people.

There was an upper limit on what you could do from sugar beet to begin with. That meant that there was not the same thrust to get as much as possible produced at home. For many of those years beet would have been severely rationed to farmers because there was a limit on what we could take. At the same time, we were refining an amount of cane sugar corresponding with exports. That was the reason investment was not put in. Then, the funds that the company could generate were used for other developments. That was another reason why more money was not spent prior to the EEC date. It was during that period that other sugar industries were spending substantial sums in countries that are now in competition with us.

8. Deputy B. Desmond.—So, you are faced now with a £30 million modernisation programme?

Mr. Sheehy.—We are in such a position that the industry will be in serious difficulty, if it is possible to survive at all, without major capital investment. What we have been doing in recent years has been in harmony with Government thinking. More than one Minister has become involved in looking at our programme, which has been referred to in the statements at our AGM’s by the proxies of the Ministers. One Minister visited some factories abroad to see for himself what some of the other companies were like.

That is what we are doing now but we have to do it at a certain rate. We have not the opportunity of doing it in the same way as the British Sugar Corporation in the UK have been able to do it. They have been able to close down a factory for a year. They have sufficient factories and they are all near each other. They can take a factory out of service for a year while they revamp it. We have to do the revamping in between production seasons.

9. Deputy B. Desmond.—Would it be fair to say that the accumulative effect of the programme from 1978 right through 1980, 1981 and 1982 is that possibly by 1983 you will have pretty massive borrowings and, on the level of profits at the moment, you could have some serious problems?

Mr. Sheehy.—We will be in a serious situation. There is no doubt about it.

Deputy B. Desmond.—That is not being alarmist but it looks that way. We have the text of the programme.

Mr. Sheehy.—The only conclusion that anybody can come to is that we will have serious problems but you have to put that against the fact that you will have no industry without investment.

10. Chairman.—At the moment you are carrying out a review of your corporate objectives to define them more clearly. I think you have brought in consultants to do that. On the one hand, you are doing that, and, on the other hand, you have committed something like £30 million to capital investment. You have also told us that you are open to diversification. Would it be fair to say that, to some extent, you have put the cart before the horse, you have committed all the funds you have or are likely to have? It may be that your investigation of your corporate objectives might result in a recommendation that you change path to some extent. You will not have the funds to do that because you have really committed whatever funds you are likely to have for some years to come.

Mr. Sheehy.—When we embarked on this investment it was according to a programme that was agreed, understood and accepted by the Government nationally as being the right one, that was that this country has a quota of 182,000 tonnes of sugar from the EEC and that nationally it is desirable to fulfil that.

That was the background. If we did not invest we would be struggling in many cases with equipment that not only was obsolete but was dangerous. It was absolutely essential to embark on this programme. The increases in capacity that we have got as a result of the investments that have been made have not been very substantial. There has been about a 20 per cent increase in capacity.

When that was done times were not quite as difficult as they are now. The company were making sizeable sums in profits even though they were not adequate. We have been pointing that out. It has been referred to in many of our annual reports. Even when the public felt that we were making a lot of money we pointed out that it was not adequate for our requirements.

We have the problem that, as we modernise, we will create redundancies. We have accepted it as one of the objectives that we should endeavour to preserve employment and that the timing of anything that would cause redundancy is kept very much in mind by us. Our thrust towards diversification was largely motivated by that kind of thinking.

When we called in consultants to help us with regard to objectives we were mindful of the fact that a review was needed, that we had a Group that had grown very considerably and that as time went on a look at structures and objectives was desirable. It is to get the two things together that we brought in the consultants to help. They have submitted reports that are being considered by the Board in respect of both. I would feel that the need for it is logical enough. It was accepted as a necessity that there should be capital investment. It was accepted by the Board, and by the Ministers, and it is a necessity to preserve employment. That was accepted by everybody and, therefore, we looked for some diversification. That was not in conflict with standing back from the company and having a fresh look at it.

11. Deputy L. Lawlor.—It is a question of the gearing situation. As the company move forward in their capital investment will they generate something like 25 per cent contribution in borrowings? Why should somebody advance those substantial sums of money in prevailing circumstances? Will the company’s financial gearing not get very much out of conventional lines?

Mr. McCarthy.—Yes, that is the problem. It is out of gear; it will be out of gear and it is getting progressively worse. That from a financial viewpoint is the problem with the company. It is totally under-capitalised.

12. Deputy L. Lawlor.—Have respective Ministers for Finance not provided or refused to provide finance, or how will the company overcome it for the future? We all appreciate that in an expanding situation or in a major re-investment situation one can drift into under-capitalised situations quite easily. How concerned are the company and what can they do about it if it is a big worry?

Mr. Sheehy.—We have been making this deficiency known to the relevant authorities over a few years.

13. Deputy B. Desmond.—The company has three problems, the difficult operating environment, seasonality and dispersal of plant. The company have a heavy working capital requirement projected for the future. Successive Governments, the last Government and the current Government, wish the company to maintain activities which might be described as being of a non-commercial employment maintenance nature. Facing these three problems, do the company feel it has a very strong case for a Government guarantee in relation to borrowing as distinct from indulging in a borrowing programme without necessarily getting full sanctions for guaranteeing the borrowings? Would the company wish us to hold the view that such is the capital structure, that strong Government guaranteeing of borrowing is merited?

Mr. Sheehy.—We should have more equity apart from greater guarantees. We recognise that the industry has advantages springing from, perhaps, its history. Undoubtedly, when it was started and when the factories were so positioned, there was a regional development content in it and that is still here. As a result we now have factories of a size, and positioned where they are, completely out of line with modern sugar industries elsewhere in Europe. Nobody in any Department will be in any doubt as to the way we feel about the need for further equity and guarantees that are involved. We do not have difficulty, however, in getting money. We do not have to call on Government guarantees to get money. It is understood by the banking institutions that the Government ulimately own us, so they do not look for anything formal by way of guarantees.

14. Chairman.—We seem to some extent, to be drifting into an area which we said we would take on the next day. We will come back to that again. In relation to the sugar operations in general terms would the company agree that sugar beet has been losing out in profitability terms as against some other forms of agricultural production? If that is so, is that a cause for worry? Do the company think they will be able to maintain the production, the 88,000 to 90,000 acres of beet in the years ahead?

Mr. Sheehy.—We feel confident that we will be able to get between 88,000 and 90,000 acres.

15. Chairman.—Will the witness comment on the first part of my question first? Is it correct to say that other crops are tending to be more profitable than beet in recent years?

Mr. Sheehy.—The gap might have closed a bit, but the profitability of the beet crop is pretty clear still.

Mr. Comerford.—The position is that the cost of producing beet has risen very steeply in the last couple of years, with the result that it takes more tonnes of beet per acre to cover the direct costs. However, the profitability is still very high. One of the factors causing us some concern is that the cost of inputs into the crop are extremely high. The profit is still there, but the farmer has to invest very substantially in order to get it. That makes other crops like barley and wheat where the inputs are much lower though the return is much lower, much more attractive from the farmers point of view. Still the profitability of the beet crop is very satisfactory. Our worry is that the number of growers has dropped very considerably. There has been a big swing from very small acreages of beet. In the last number of years there was a very big drop in the number of growers. We are now down to about 9,000 growers. One of the consequences of that is that when a number of growers decide to go out the drop in acreage is very considerable. That is of some concern to us. However, there is plenty of potential for increased yields. The profitability of the crop can be maintained relative to others, and we are quite confident that we will maintain an acreage of 80,000 plus over the next couple of years. We will, however, have to plan a campaign to do that and put up a fight. We have a big research programme going to increase yields and to get a better return per acre for the grower.

16. Chairman.—With better yields, of course, the company would not need 90,000 acres. Is that so?

Mr. Comerford.—That is so.

Mr. Sheehy.—We are trying to keep our eyes on 182,000 tons of sugar rather than on the acres. There are long-term things that we can do that will substantially increase the yield of sugar per acre but that is a few years on.

17. Chairman.—The company would not regard the lack of supply of beet as a serious headache?

Mr. Sheehy.—We have made many strides relative to others in Europe in the years. We were away back, we have come well up in the league in yields per acre, and we know from our research programme that there is potentially a lot more to go after. We feel that we will achieve very substantial further increases in yield per acre that will keep the crop competitive.

Mr. Comerford.—There is no room for complacency and we are very actively pursuing areas where we can increase yields so that the crop remains attractive for growers. We are confident with the attention the crop is getting, with the research we are putting into it, and with the potential that is there, that we will be able with a lower number of acres, to maintain our sugar production.

18. Senator Cooney.—Have the yields been increasing?

Mr. Comerford.—In the last couple of years it has been relatively static, but the weather conditions were very bad. It was sown a month late last year, the harvest conditions were bad and the campaigns were on too long. When your campaign goes on too long you lose a lot of beet at harvest time. This year we are expecting quite a big increase because the crop was in early; it looks fairly promising and with better weather conditions in the next couple of months we should get a big increase. Overall it has been increasing but not as quickly as we would like.

19. Senator Cooney.—Are this year’s sowings up on last year?

Mr. Comerford.—This year’s sowings would be three weeks to a month ahead of last year.

Senator Cooney.—In terms of numbers of producers?

Mr. Comerford.—Producers are down and the acreage is down somewhat. It went down to about 82,000 acres against 86,000 acres last year, but at this time we would expect to produce more sugar per acre than we did under the last year’s acreage, assuming this year turns out reasonably favourable.

Mr. Sheehy.—Over about 12 years the yields increased about 50 per cent. That is taking an average figure, not just one year’s figure.

20. Senator Cooney.—Is there much of the company’s technology utilised in achieving that high yield or is it overall better husbandry?

Mr. Sheehy.—Well, we have developed in conjunction with the Agricultural Institute and other people we have worked with abroad. The seed varieties are appropriate to the country and that is the major thing. In terms of the use of modern techniques in planting beet, the use of sprays, the percentage of the beet that is mechanically handled in every way now; we are not behind anybody in Europe. Were it not for that we could not survive.

21. Senator Cooney.—Is there any further improvement possible in regard to the seed breeding?

Mr. Sheehy.—Yes, we know that from the research work that is going on that by the end of this decade we will be very substantially ahead of where we are at the moment in ways that might change the industry radically. We are working on autumn planted beet and there are a lot of things to be overcome yet, but indications are there and from the scientific information available we are confident that we will have a sizeable quantity by the latter half of this decade.

22. Senator Cooney.—Do the company do their own field trials?

Mr. Sheehy.—Yes, and we do more. For instance, we have an arrangement with The Agricultural Institute that some work is financed jointly by ourselves and the farmers and it is done on behalf of both by the Agricultural Institute. On the seed breeding we have our own input. We commissioned the Agricultural Institute to work on our behalf and we are working with another foreign outfit with whom we are engaged in a major programme of work. We have our own development team as well. The whole thing costs a fair amount of money. Without it we would not have got where we are and it is essential for the future. We have found it necessary to be a little bit ahead of others in the application of modern technology in order to keep the industry where it is and we feel there is further room there.

23. Chairman.—Does that apply to the factories in regard to extraction rates, manning levels and so on? How does your efficiency compare with European competitors?

Mr. Sheehy.—Our efficiency would not be as good as the European levels in some areas. It relates to the investment that was made and the equipment in the factories. Our equipment is 50 years old and that in Carlow is older still. They are very old factories by any standards that you could apply in the sugar industry, in the type of buildings and so on, and not what would apply in a modern factory. Very many European sugar industries while well protected, had the resources left in them to modernise them. It is quite common for them to gut factories completely or build a new factory beside an old one. We are not up to them in throughput. Our average would be not much more than half in terms of throughput per day.

24. Chairman.—What is the average?

Mr. Sheehy.—We have four factories and the average throughput per day is about 3,600 tonnes. We can supply figures for the major companies in Europe and they are away above that. The Danish factories have well over 6,000 tonnes.

25. Chairman.—In relation to what?

Mr. Sheehy.—Our average throughput of beet per factory per day would be 3,600 whereas the Danish would be over 6,000. One of the Dutch companies in Holland would be 6,000, 9,000 and 7,000 and the other 6,000, 7,000 and 5,000 so that in that respect we would be very much out of line.

26. Chairman.—Does that mean that the company’s average plant is smaller than theirs?

Mr. Sheehy.—Our average plant is much smaller than theirs. Apart from that, they have moved in with modern equipment for all the unit operations, so when it comes to fuel usage we would only average 60 to 70 per cent of the Danish figure, so that our efficiency would be that much less. Our people are not using our equipment badly but our equipment cannot give any more than that, and their equipment can.

27. Chairman.—Would their production costs per ton be only 60 or 70 per cent of your company’s?

Mr. Sheehy.—In many respects that would be correct. When you come to the throughput of sugar or the amount of beet handled per man we would be very much out of line in respect of those figures. On recovery of sugar out of the beet we would not be bad but not up to the best.

28. Senator Cooney.—Even between your company’s factories there is an immense discrepancy. Carlow is more than 100 per cent better than Tuam; Mallow is considerably better, and Thurles is better than Tuam but still a lot worse than Carlow. Is there any explanation for those discrepancies?

Mr. Sheehy.—We have been endeavouring over the years to get Carlow up to higher capacity because it is in a better and more intensive beet growing area; so we have been concentrating a bit more on Carlow and Mallow in regard to investment than we have on Tuam and Thurles.

29. Senator Cooney.—Is there better technology in Carlow and Mallow?

Mr. Sheehy.—There is better equipment in those two, and that accounts for the difference.

Mr. Comerford.—The beet is grown much nearer to the Carlow factory than it is to the other factories. A very big proportion of the beet in Thurles comes from Wexford. In the case of Tuam the beet is brought in from as far as east Cork. The cost of haulage of beet is much higher. It is also a factor in our total production costs when the average distance from the factory is about 30 to 35 miles whereas on the Continent it is less than ten miles.

30. Senator Cooney.—That would not be a factor in relation to throughput?

Mr. Comerford.—Not in relation to throughput but it would be a factor in relation to the cost of the beet going into the factories. The beet cost into Tuam is much higher than it is into Carlow.

Mr. Sheehy.—That is why we put the investment into Carlow and not into the others.

31. Deputy B. Desmond.—Bearing in mind that the throughput capacity at Tuam is as low as 2,200 tons and also bearing in mind the heavier transport costs and the wider growing area, have you an actual figure per ton cost per man or a direct comparison between say Tuam and Carlow?

Mr. Sheehy.—These are figures that I could get for you. We have figures of the cost of every element that goes to make up the cost of sugar in each of the factories whether it is in labour, fuel or overheads. We have a complete breakdown of all those. There is a very substantial difference.*

32. Chairman.—The actual size of the factory is a factor apart from anything else?

Mr. Sheehy.—That is so.

33. Deputy B. Desmond.—What about the future situation? In your submission you were a bit optimistic in assuming that acreage in the year ahead might average out between 88,000 and 90,000 acres. Bearing in mind the pressure from the Community for a 10 per cent reduction being imposed at the price negotiations, the fact that you resisted and that there was no change this year and bearing in mind future changes, will not the acreage drop? I can appreciate why you should have a solid optimism in your position but is it not over-optimistic not to assume that pressure will come for a reduction in the Irish quota? Supposing next year there is a 10 per cent reduction, what will the effect of that be?

Mr. Sheehy.—We totally disagree with the Community’s attitude in this regard. We would feel that the Community are not even looking at the world scene in formulating their own policy. If you look at sugar price movements in the world market in the last 12 months it has gone from just £100 to about £350 certainly more than £345. That is the change that has taken place in the world market. There is about a five million tonne difference, on a world basis, this year between sugar consumption and sugar production and that for the second year running. The sugar business has gone down through the years into these cycles. We feel that worldwide consumption is going to increase and these high prices are going to last for a longer period. That is overall but even within the Community there has been a tendency for an increase in consumption, even though it is small, but nevertheless that tendency has been there. We feel that there is a good case in the main for holding our basic quota. We do not think that justice was being done in the suggestion that was put forward by the Commission to reduce it.

34. Deputy B. Desmond.—I share your views of the world market in regard to consumption. Nevertheless the argument we face in the context of membership of the Community is that there is a surplus and that the pressures would appear to be very considerable at present. I know you were remarkably successful in your campaign. It has been suggested by many commentators that the prospects are not that good in terms of keeping back future pressure. Am I wrong?

Mr. Sheehy.—That is a view that is held. We would not subscribe fully to that view. The Community has not been right in its forecast of sugar in the past and may not be right in respect of the future. The way price movements have taken place in the recent past, it is probable that as we are sitting here, instead of aiding people to export, as was the case 12 months ago, which was the background against which that policy was formulated, they are probably penalising and fining people and collecting revenue.

35. Senator Cooney.—On the question of throughput, there has been a considerable investment in plant modernisation over the last two years. Is that so?

Mr. Sheehy.—Very modest.

36. Senator Cooney.—Have not your fixed assets gone up to £38 million?

Mr. Sheehy.—We invested all we could but what we could was not near enough.

37. Senator Cooney.—It was substantial but the benefit in terms of increased throughput does not seem to be in proportion?

Mr. Sheehy.—No, the throughput did not go up. In a lot of the investment that we make we have many things in mind. They are old and obsolete factories. There was the question of safety in many cases. There was the whole question of quality of product. Equipment was being replaced that could not go on any longer. The increase in capacities that we got was got indirectly as we did the other job. When we put in a new piece of equipment we geared it to be that much bigger so that we could nudge up the factory capacities by a series of small moves.

38. Senator Cooney.—You are saying that the extra investment of £20 million has only been capable of nudging up production? How much would it take to give it a good push?

Mr. Sheehy.—That is right. In the next three or four years we would want to spend another £40 million.

Senator Cooney.—Another £40 million!

39. Chairman.—I understand that all of the factories, certainly the smaller ones, are not really viable. If you are thinking in terms of £40 million, would it be better to close a few of them and build one good factory?

Mr. Sheehy.—If pure economic terms were the only criterion I do not think in this country or in any other country in the EEC you could justify a 2,000 tons-per day factory.

40. Chairman.—Tuam is not commercially viable?

Mr. Sheehy.—In strict commercial terms, no.

41. Deputy B. Desmond.—If you were to close down Tuam what plans have you, if any, for alternative employment for those directly concerned?

Mr. Sheehy.—The company has not made any decision to close down Tuam.

Deputy B. Desmond.—I am only too acutely aware of that.

Mr. Sheehy.—The attitude of the Board would be that the company would have an obligation towards its employees and perhaps towards the growers, if that were to happen. That would have to be borne in mind as one of the first things that would be involved. We have a good work force in Tuam. We did something in that area by bringing in an engineering plant as part of our recent diversification. The attitude of the Board is that of accepting its responsibility towards its employees and the growers. If that proposition had been debated seriously with the shareholders we would be putting forward——

42. Deputy B. Desmond.—A vital question which is often asked, are you keeping it open because you want to or because you have been told to?

Mr. Sheehy.—We got this quota of 182,000 tons. Heretofore, we could not have processed that in any reasonable time, even as we are at the moment, in the other factory areas. The farmers will tell you the campaigns are too long.

43. Deputy B. Desmond.—If your modernisation programme goes ahead as currently projected and if part of the capital investment is not necessarily channelled into Tuam, consciously or unconsciously, could this mean the demise of Tuam?

Mr. Sheehy.—We would not have any plans for any major investment in Tuam. This would mean that, with the major investment being made in the other factories, it would become more out of balance.

44. Deputy B. Desmond.—How many jobs are there at the moment?

Mr. Sheehy.—Five hundred and thirty. That is the average. I think we have the figures here. It would be substantially higher during the campaign.

45. Chairman.—In answer to Senator Cooney when he asked you what investment was really necessary to improve the productivity and so on, you mentioned £40 million. Is that in addition to the £30 million?

Mr. Sheehy.—We have spent £28.5 million since 1975.

46. Chairman.—You talked about an investment programme of £30 million. Has that all been spent?

Mr. Comerford.—Nearly all of that has been spent. Between 1975 and this year up to October of 1980, we will have spent £28.5 million. On top of that, we estimate over the next three years to do a reasonable job in modernisation we will need to spend another £36 to £40 million.

47. Senator Cooney.—Would that have an effect on manning levels?

Mr. Comerford.—There has been a reduction. We got some increase in throughput in the factories, something of the order of 18 per cent in that period.

Mr. Sheehy.—We will be able to supply you with figures on man minutes per ton of beet which we have at the factories for each year and you will be able to isolate the throughput increase factor which will demonstrate that our throughput has increased, and in efficiency generally there has been an improvement of up to 22 per cent.*

48. Deputy Kenneally.—You had the idea of getting land in the west and leasing it to farmers. How is that effort going, or has it been successful?

Mr. Sheehy.—We have got about 600 acres of land that we have taken on long-term lease from farmers this year, and we are letting that back out to other farmers to grow crops and within the rotation, beet will be included. This is because those farmers who have that land to set would not be well disposed to setting it to other small farmers, but they feel that the company makes for security. We arrange for the payment of the rent and set it to others. This is land that would not otherwise be in tillage. This will increase the pool of tillage and hopefully maintain the acreage of beet in the west. We do not see any substantial increase in the west even though we give them incentives over and above that is given elsewhere. We have given them a special deal on pulp this year and on freight subsidies we pay 50 per cent more west of the Shannon than we do elsewhere. Through no fault of their own, the farmers in the west on average get considerably lower yields than in the rest of the country.

49. Deputy B. Desmond.—Could we pass on to the question of sales? You have been successful with sales in Northern Ireland. What is the total consumption of sugar in Northern Ireland?

Mr. Sheehy.—We estimate at the moment that it might be up to 42,000 tons.

50.Deputy B. Desmond.—You supply 25,000 tons of that. Is that correct?

Mr. Sheehy.—We have about 60 per cent of the market. We have increased there. We used to have 10 per cent of the Northern market. We have been fairly successful in the North. I do not think there is much further room for growth there. We have a special brand of packaged sugar in the North and we are happy with the situation there. We are in competition there with Tate and Lyle and the Danish Sugar people.

51. Deputy B. Desmond.—The British Sugar Corporation?

Mr. Sheehy.—Not the British Sugar Corporation to the same extent as Tate and Lyle which is a refining company in the UK, and Danish Sugar.

52. Deputy B. Desmond.—Are you able to compete? Is there any subsidisation? Are you in straight competition?

Mr. Sheehy.—We are in straight competition.

53. Deputy B. Desmond.—Do you think you will hold it?

Mr. Sheehy.—I think we will hold it. We have a transport advantage. That is one thing. We have an acceptable brand. The brand we own up there has been associated with the Northern company. Ultimately we have a big say. They are doing the marketing.

54. Deputy B. Desmond.—On that aspect of sales, I cannot recall getting an answer from you on the proportion of company sugar sales made direct to the manufacturing sector. I am trying to segregate Northern Ireland and the ordinary domestic market here. What do you sell to manufacturers?

Mr. Comerford.—About 90,000 tons to manufacturers out of a total market of 163,000.

55. Deputy B. Desmond.—What about prospects of growth in that area?

Mr. Sheehy.—They are not great, because these people are under competition from abroad. There was the recent bad news about a factory here in Dublin closing. They were substantial users of sugar. These people are finding the competition fairly severe. We do not feel that there will be any substantial growth there. Though our total home market helps, we do, of course, at the moment export any surplus that we have. Apart from Northern Ireland, we export some to the UK and occasionally to the Third World under EEC schemes, but that would depend on what we would have available from one year to the other.

56. Chairman.—You do not see any change in industrial or domestic usage?

Mr. Sheehy.—In the domestic situation there has been a tendency to fall, that is, in ordinary granulated sugar. There has been a tendency to increase in specialities such as brown sugar and so on, one nearly balancing the other. There is no major change.

57. Senator Cooney.—I should like to revert to the question of long-term leasing. Have you any difficulty in getting farmers to take up the leases in the west of Ireland?

Mr. Sheehy.—No.

58. Senator Cooney.—How do you pick them?

Mr. Sheehy.—The local Beet Growers’ Association are enthusiastic about us doing this thing. They would have liked to spearhead it themselves, but they had difficulties. We have had no difficulty whatever, nothing but enthusiastic support from the BGA people.

59. Senator Cooney.—How long have you been doing this?

Mr. Sheehy.—Three to five years.

60. Senator Cooney.—Is there provision for lease renewal, and if so what is the mechanism for that?

Mr. Comerford.—It varies from farm to farm depending on the conditions at the time. I could not give an exact figure. You make a deal with a particular farmer, depending on the land. In one case the land may not be in the best of condition so you take it on the basis that you would improve the fertility of the land by tillage. You may have to do some reclamation work and maybe some other work that may help that particular farmer. The conditions vary very much from farm to farm but generally there would be some explanation for it.

61. Senator Cooney.—Have any leases been for longer than five years?

Mr. Comerford.—Not up to the moment. We are anxious to get a system where we would have rotation of crops. We would have some cereal tillage. We want to increase the total bank of tillage land. Then we want a beet crop. Originally we wanted potatoes but it depends on the rotation of from three to five years.

62. Senator Cooney.—The person you lease to undertakes to carry out the rotation?

Mr. Comerford.—That is right.

Mr. Sheehy.—Some of the land might be leased on a year to year basis: it might not have some land let for the entire period. Farmers might be interested in growing barley, for instance.

63. Chairman.—Carlow processes a considerable quantity of cane sugar each year and it did not break even on that—is that correct?

Mr. Sheehy.—That varies from time to time.

64. Chairman.—What is the reason behind it?

Mr. Sheehy.—When we went into that in the first instance, the EEC had agreed with certain countries to take 1.3 million tons of cane as part of the interim agreement when the UK went into the Community. Part of the base which was established was cane refining in the past in order to have sugar available at a cheap price to cover confectionery goods into the UK. We said that we were part of the statistics. That was one of the arguments that was used. As well as that, the argument was put forward that we had a facility in Carlow to do this and special terms under which factories of this capability got preferential treatment. For instance, the Tate and Lyle refineries were put into this category, as was the Carlow factory. We were in this advantageous group as far as access to beet is concerned under the EEC regulations. We were attacking at that time the market in the North. We went for the ACP sugar to have a secure supply—having that additional to our beet sugar supply, we would always be able to meet demand. Over the years it would not be right to say it was uneconomic. It has been economic, and a lot depends on how you assign overheads. Most of the overheads that we referred to would not be extra in this respect. We certainly would not have had the confidence to go after the Northern Ireland market or even the small market in the UK without this extra supply. This is a very good kind of reserve position to be in regarding security of supply for the home market.

Mr. Comerford.—In the last couple of years with our high level of inflation the cost of refining has gone up considerably whereas the EEC increase in the price of sugar has gone up only 2 or 3 per cent. There has been a squeeze on profitability over the last two years.

65. Chairman.—It is not something you regret having got involved in?

Mr. Sheehy.—No, it is not. It has served us well in the past and there is no reason to feel we should not have gone into it.

66. Chairman.—Could it not be said that your agricultural services to some extent duplicate the work of the statutory agricultural advisory services?

Mr. Sheehy.—The officers we have are procurement officers really; their main task is to get the feedback to the company. They do more work than just advising. They also become involved in selling and servicing. We have found it necessary to support the beet crop over the years. As well as that, at the advisory end this is pretty specialist work. We think that is the right way for the company to go. We have no regrets about it. We would not advocate change from that at the moment. We feel that we would fuel inefficiency if we did. Other processors are going the same way. Even some of the dairy people are heading in that direction now.

67. Chairman.—You feel that you would not get in the beet if you did not have this?

Mr. Sheehy.—We feel we would not get the beet in because we feel we would not have made the impact on the efficiency of production we had last year, for instance.

68. Deputy B. Desmond.—One of the figures that we would be interested in getting is the proportion of turnover of the main sugar division of the company devoted to Research and Development.

Mr. Sheehy.—We have a detailed breakdown of our research and development figures. It varies from one operation to another and overall it is just about 1 per cent. It varies from marginally under 1 per cent in the case of sugar to 3 per cent in the case of the agricultural machinery division. On the sugar side a percentage of that, of course, is on the agricultural end. We will let you have details as to how the figure is made up.*

69. Deputy B. Desmond.—As regards transport, what would be the effect in Tuam if CIE rail lines were closed as has been suggested?

Mr. Sheehy.—If certain CIE lines were closed then the supply to Tuam would be shut off.

70. Deputy B. Desmond.—You are acutely aware of that?

Mr. Sheehy.—We are acutely aware that if the infrastructure is not there we cannot get the supply to Tuam. We spent a lot of money last year on the link to Wexford. We put up a depot there and get 130,000 tons of beet from that area. We spent £700,000 on the depot last year in Wellington Bridge. That could only be justified in a case like that where there was a lot of beet and there was no other way of bringing it. In the case of other areas supplying Tuam, if the Athenry line was not there, then as Tuam gets so much of its beet by rail all that would be shut off and instead of the 2,000 tons per day we get, if we were depending on the normal road feed into Tuam, it would be down to half of that.

71. Deputy B. Desmond.—Do you have a very large road transport fleet which is subject to heavy seasonality? It has been suggested, but I do not share the view, that rather than tying up capital you would be better off contracting out your transport haulage requirements to private contractors.

Mr. Sheehy.—We do not feel that we would be better off. We feel that we have a reasonable mix at present. We have about 70 to 80 per cent of our traffic requirements met by our own fleet. We contract out during the peak season. A lot of our fertiliser delivery business during the spring is hired out. The same applies to the ground limestone business. We have over the years looked at this because it is something that has frequently been raised. Every time we looked at it we were satisfied that we were adopting the right course by preserving a fairly large fleet.

72. Deputy B. Desmond.—On the aspect of the energy generating situation, with the announcement on the feasibility studies now being done on a natural gas grid, if there was a lead into Carlow or Thurles would you be in a position to avail of natural gas?

Mr. Sheehy.—If there was gas there we would have a look at the costs. But on the face of it it would appear that it would be the right course to take it. A British sugar company uses natural gas as fuel. In that connection we have been largely dependent on oil. We use 90,000 tons of fuel oil per annum and because of the increases in the price of oil this year we are changing over to coal in three of our factories. We will not be able to change the fourth factory, Carlow, because it would be too expensive. The boilers we are changing in the other factories are boilers that were put in in 1932 and will have to be replaced within a short number of years anyway.

73. Senator Cooney.—Do you import coal directly?

Mr. Sheehy.—Yes, and we will have to do so. We got a lot of coal from Ballingarry when it was in operation. Perhaps we may get some again this year from Ballingarry but we will have to import coal directly.

74. Senator Cooney.—Are you importing coal at present?

Mr. Sheehy.—It will be later in the year because we do not want to be tying up money so far in advance but we have inquiries out for prices of coal that will be imported.

Mr. Comerford.—The amount of coal we will have to import this year will be relatively small because of the amount of slack that is available. That is the type of coal we will be using. There is a good supply of that in the country which otherwise I understand, might have to be exported.

75. Senator Cooney.—Yes, but you intend to import it directly? You do not intend using any of the present coal importers?

Mr. Sheehy.—Ten or 15 years ago we did but it depends on the price because sometimes they can give you a price for a lot that might be cheaper than you would get it yourself. That would not generally be the way, but it can happen. The same applies to the oil; sometimes we used get it direct and sometimes we used get it from the traditional companies.

76. Deputy Kenneally.—As regards Wellington Bridge, what was the real necessity for that project? It is really only a store, is that not correct?

Mr. Sheehy.—When the industry was structured based on CIE providing a service from all these areas farmers were geared to supply the beet to the rail terminus. We wanted that beet in Thurles. Not all the beet goes to the factory that is nearest to it. South Wexford beet was geared for Thurles. CIE felt at one stage that there was a case for closing down that line. They threatened that they were going to do so. They said that it was not economic for them to haul beet unless there could be liner trains. They could not work if they depended on picking up the beet from each of the main stations. Likewise they wanted full wagons of beet and when we are taking it from individual farmers we do not always have full wagons so we had to make it economic. We had to have a receiving area and a sampling point.

Mr. Comerford.—It needs many fewer wagons, about one-third, to take the tonnage from Wexford, than was required on the old system.

77. Deputy B. Desmond.—With regard to your negotiations with the farming community over the years, it has been suggested that the Sugar Company has been working for the farmers and has been letting them get away with a lot. Comment?

Mr. Sheehy.—We have been paying farmers a small amount above what they are legally entitled to under the European Community rules and regulations. Farmers are entitled to a certain basic price for beet, they are entitled to a premium above that, depending on what the outcome of the pulp sales, and they are entitled to a premium above that depending on sugar price. That is part of the regulation. That is built into the formula. Because of inflation and oil prices they would have got away with something in the pulp element. It is not correct to say that the farmers have been getting far more; they have been getting marginally above what they were entitled to. In the formula we have with them this year, we guaranteed them a certain price and what they are entitled to under the Brussels arrangement could well come up to that. What we have been paying them has been just enough to get the required acreage. In recent years we have not been in a position to ration acreage in any serious way.

78. Deputy B. Desmond.—Nevertheless, there has been a jaundiced view in some quarters that with guaranteed beet and pulp prices, guaranteeing and providing seed and providing advisory services, there has been virtually an incestuous relationship, so much so that in terms of modernisation of the plant and the heavy capital investment required, the taxpayer had to bear the cost. Is this so?

Mr. Sheehy.—We say that the margins they have in relation to the inputs they make have not been excessive.

79. Deputy B. Desmond.—But it is a profitable crop?

Mr. Sheehy.—Yes, it is a profitable crop, but it is a profit in which there is a lot more at risk than in the case of other farming crops because of the amount of money they have to invest and if the crop fails they lose a lot more. Farmers feel that the increase in the margin they have is not worth the risk. We would have taken more acreage this year if we got it.

80. Deputy B. Desmond.—Would you have taken another 5,000 or 6,000 thousand acres?

Mr. Sheehy.—Yes, if we had got it.

81. Chairman.—Are you saying the reason for that is that your price for some farmers was just marginally too low?

Mr. Sheehy.—That is the way they would see it.

Mr. Comerford.—We should clear this point because over the last three years, for example, the increase that we have given to the farmers has been approximately £1 per tonne. That would not meet their increased costs of production. In actual fact, we have been cutting into their margin for the last three years. The price set by the European Community is a minimum price. We have been paying slightly above that but not enough to get surplus acres.

Mr. Sheehy.—We can give you a breakdown of what the farmers were entitled to each year under European Community regulations.*

Deputy B. Desmond.—I would be very interested in that because I immediately proclaim my ignorance.

82. Chairman.—Is it the position that you are giving marginally above the price?

Mr. Sheehy.—We guaranteed them £27 per tonne this year as a base price. There would probably be a 50p return when the European Community outcome is fully known. It will not be fully covered.

83. Senator Cooney.—Is there a transport subsidy?

Mr. Sheehy.—Again, that is within the framework of the European Community. We are not doing anything special in that regard. It might cost us money because our farmers are small and scattered throughout the country. Farmers who grow sugar beet under the EEC conditions are entitled to support for transport. That is written into the regulations.

84. Senator Cooney.—Does it cover their transport costs?

Mr. Sheehy.—Not at all, on average about 50 per cent.

Mr. Comerford.—In the last three years what we have paid in subsidy would be approximately what is allowed by the EEC. We are not out of line in respect of transport even though the distance from the factory is greater.

85. Chairman.—Is the transport subsidy to counteract the fact that some farmers have longer distances to transport the beet than others, or is it considered a subsidy even if all your supplies had to travel the same distance?

Mr. Sheehy.—Under the EEC regulations the industry is obliged to subscribe towards transport costs. Each country interprets the regulation to suit themselves. We have an agreement with the growers that we pay subsidy on a mileage basis. It works out at about 50 per cent.

86. Chairman.—Did you have transport subsidies before you were subject to EEC regulations?

Mr. Sheehy.—We did, always. That has been a feature of the sugar industry in general. They had them in all the European countries.

87. Deputy B. Desmond.—On the strength of the case put to us, how have you failed, if that is the appropriate term, to convince the National Prices Commission to give you a price increase?

Mr. Sheehy.—I do not think we have failed to convince the National Prices Commission but, having convinced them, we still have some way to go to get the price increase. On occasions in the past the Government and ourselves have taken into account the position of the manufacturers who are in this country, who are our customers, whom we want to keep, and who by reason of EEC regulations were, perhaps, disadvantaged. From an industry point of view we want to help towards preserving those customers and it is also national policy to do so.

88. Deputy B. Desmond.—The Government do not seem to have been convinced that as a result of the NPC consultation you have suffered any revenue loss? Comment?

Mr. Sheehy.—We would not have any serious disagreement with the findings of the NPC. There were opportunities perhaps in the past when certain sectors of the market could have taken more. There would have been no fear of competition eroding our position. That was not availed of. Likewise one feature that has disurbed us is that price rises of sugar within the Community come at a specified time and we have the habit of having them several months later.

89. Deputy B. Desmond.—Therefore it is fair to assume that there has been very considerable Government influence on the level of pricing policy, say in the past three years.

Mr. Sheehy.—Yes. Over a big number of years we would have lost.

Mr. Comerford.—It is delays rather than not availing of the situation. It has happened within the last three or four months. In some years it cost us £1 million.

90. Senator Cooney.—It did preserve employment in industries down through the years.

Mr. Sheehy.—The implementation of an increase itself was delayed subsequent to the general application within the Community. This is one issue. There were the steps also that we took in consultation with the Department for the preservation and the helping of certain industries.

91. Senator Cooney.—Was that a factor?

Mr. Sheehy.—Yes.

92. Deputy B. Desmond.—It has been suggested by you that the result of that delay would have been a loss of up to £4 million in revenue.

Mr. Sheehy.—Yes.

93. Deputy B. Desmond.—That appears to be very substantial, is it not?

Mr. Sheehy.—Yes, but that would be substantially correct. A £1 million loss in some years would have been the loss because of delay.

Mr. Comerford.—In one particular year there was almost £2 million lost.

94. Senator Cooney.—That would be on looking on the sugar company as an island without any existence in a general economy.

Mr. Comerford.—Yes.

95. Chairman.—Assuming that you could just fix your own price, how high could you have gone without being in danger of competitors coming in from abroad?

Mr. Sheehy.—In the past we could have gone substantially higher but not so much at the moment.

96. Chairman.—Could you give some idea of how higher?

Mr. Sheehy.—I would say that if we were free to fix our own price within the Community rules, which is the way in some of the countries, £6 or £7 million. It would be more than that. We could have lost £6 or £7 million probably. We can quantify value over the years.

Mr. Comerford.—The quantity we applied for in each case to the NPC we could have always applied in practice. There would have been no difficulty in it and if there was a free situation we could have got more than we applied for to the NPC from the market place. The same does not apply today.

97. Chairman.—What you applied for was that what you thought was safe from the point of view of competition as well as what——

Mr. Sheehy.—We applied specifically within the rules of the NPC and stated their cost. We had these contracts forward and then you reflect back to the previous year. It is purely on cost.

98. Deputy B. Desmond.—Would it be fair to say that the manufacturing sector could have or should have borne the best part of £1.5 to £2 million of that. Is it an across-the-board situation or do you have a differential price for manufacturers?

Mr. Sheehy.—We have. The manufacturers who got preferential treatment were those who were under pressure because of the way the MCA’s applied. They applied to some confectionery goods and not to others. There was protection of those industries against imports to enable them to maintain the export business they had. They were getting no MCA protection under the EEC system.

There were other sectors of the confectionery industry, say the chocolate section, that were getting such protection. Therefore we had not to be worried about those sections that were not getting this protection. There was about 30,000 tonnes of sugar equivalent involved in that.

99. Deputy B. Desmond.—That would be 30,000 out of 90,000. Is that so?

Mr. Sheehy.—Yes.

Chairman.—We have not really covered all we intended but we shall leave the remainder until next day.

The witnesses withdrew.

* See Appendix 4.

* Data supplied, in confidence to the Committee.

* Data supplied, in confidence to the Committee.

* See Appendix 5.

* Material included in Committee’s Report.