RIGA - The Latvian government said it would not sue the European Commission for the sugar industry reform program, which has hit the country's two mills.
Agriculture Minister Martins Roze said that although the government concluded that the EC regulations on restructuring sugar mills were inadequate, any litigation would last several years and would fail to solve problems in the sugar industry.
The EC's plan for deregulating all EU sugar mills calls for revamping production or compensating mills that voluntarily close. Mills that decide to shut down must first pay a deposit to the tune of 120 percent of targeted compensation.
Latvia's sugar mills and the Agriculture Ministry outwardly disapproved of the plan 's in particular the size of the deposit 's and have prepared the necessary documents for court action. A ministry spokeswoman said that Jelgavas Cukurfabrika (Jelgava Sugar Mill) would have to pay 32.8 million euros and Liepajas Cukurfabrika (Liepaja Sugar Mill) 19.5 million euros should they decide to mothball operations. Alternatively, if the mills choose to scale down production, they will have to pay deposits of 24.6 million euros and 14.6 million euros, respectively.
If the sugar mills reject the EU's quotas outright, Jelgava will have to pay 11.4 million euros, and Liepaja will have to pay 6.8 million euros.
Roze said that sugar mills had several options 's e.g., produce bioethanol along with sugar.
Meanwhile, it was reported this week that Jelgava Sugar Mill would continue producing sugar. According to Dienas Bizness, the mill was determined to keep operating despite a bleak financial outlook.
As Board Chairman Janis Blumbergs said, "We have to choose the lesser of two evils. The mechanism of quitting the market provided by the regulation is not adequate 's it proposes to shut down the whole mill and to spend all the funding on solving environmental and social issues. We do not want to avoid this, but a company that has been operating successfully cannot be told just to shut down without even compensating the value of non-depreciated equipment."
Blumbergs said reform of the industry would be difficult and that the company's profit would decline to a minimum. Still, by going through the painful reform, the mill would continue working. Since the objective of the EC's reforms was to get less competitive sugar producers to quit the business, and because compensation is not adequate, the Jelgava mill's shareholders and managers believe continuing production is the most logical answer.