Mary Coughlan (Donegal South West, Fianna Fail)

As both questions deal with the closure of the Carlow sugar factory and the future of the sugar regime I propose to take them together.

The Government has always been very committed to the sugar industry in Ireland, on both the growing and the manufacturing sides. The manufacturing industry provides the essential outlets for the sugar beet crop which is a very important element in the agricultural economy and a valuable source of income to 3,800 farmers in the beet growing sector. The industry has provided very important employment opportunities at the sugar plants in Carlow and Mallow, in addition to supporting employment in associated industries.

The most important element in the overall sugar sector is the EU sugar regime which underpins the sugar beet growing and sugar manufacturing industry in the community. The essential features of the regime are rules on prices and production of quotas. The regime has existed since 1968, long before Ireland joined the European Union.

Under the EU regime Ireland has a quota for manufactured sugar of approximately 199,000 tonnes. This amounts to approximately 1.1% of the total EU quota which is available for use by the sugar manufacturing enterprises in the member states. Here it is processed by Irish Sugar Ltd., the only manufacturer of sugar in the country. Irish Sugar Ltd. places annual contracts with farmers to grow a specific tonnage of sugar beet sufficient to manufacture the quota.

I compliment those involved in the industry on filling the quota almost every year since we joined the European Union. There were a few small exceptions when it was not filled, mainly due to bad weather. The 2004 harvest was very good and beet deliveries allowed for the manufacture of more than 220,000 tonnes, well above the quota.

Reform of the EU sugar regime is high on the agenda because of the World Trade Organisation and other international pressures. The EU Commission is expected to bring forward formal legislative proposals for reforms of the sugar regime in May this year. However, the Commission outlined its broad ideas for reform of the regime in a communication to the Council and the European Parliament last July. These proposals include a reduction in two stages in the institutional price of sugar by 33% to €421 per tonne; a similar two stage reduction in the price of sugar beet to €27.40 per tonne; and partial compensation to farmers of 60% for the reduction in the price of sugar beet, the compensation to be part of the direct payment and subject to cross compliance.

A reduction of 16% in quotas among the member states is proposed. The transfer of quotas between member states is also envisaged. It is generally acknowledged that reform of the EU sugar regime which was not dealt with in the main CAP reform process in 2003-04 is now unavoidable because of developments at World Trade Organisation level and other international pressures. However, the European Commission's initial reform ideas would, if adopted, have serious repercussions for sugar beet growing and processing in this country. I have made it clear in discussions with the Council of Ministers that the Commission's initial proposals are unacceptable.

With nine other EU member states I signed a letter to the EU Commissioner for Agriculture stating that the Commission's proposals would have a devastating effect on farms and the industrial enterprises working in the sector. We accept the necessity to reform the existing regime but believe that the reform should aim at maintaining the existing distribution of sugar beat and sugar production in the entire EU territory.

We believe that reform should be based on the following principles: an import system from third countries should be put in place, which will ensure predictable and regular import quantities; the price reduction should be significantly less than what is currently proposed and should be implemented more gradually; the impact of the quota reduction should fall mainly on those member states that are net exporters of sugar; and the transfer of quotas among member states should not be allowed.

The Commission is expected to bring forward legislative proposals in May with a view to reaching agreement in the Council of Ministers before the end of this year. My overall objective in the forthcoming negotiations is to ensure the future shape of the EU sugar regime is consistent with the continuation of an efficient sugar beet growing and processing industry here.

The recent decision by Greencore to close its sugar plant in Carlow and to consolidate all its sugar manufacturing in Mallow was taken in light of the increasing competition in the sugar market and taking account of the reality that changes will occur in the industry as a consequence of the reform of the sugar regime.

Increased competition from overseas means that imported sugar now amounts to 20% of the Irish market. Competition in Ireland has increased since the announcement of the Commission's proposal for reform last July. The trend toward rationalisation and increased productivity in the sugar sector has been evident throughout the EU for some time with the number of plants decreasing by 40% between 1999 and 2001.

In the EU 15, for example, the number of sugar plants declined from 240 to 135 between 1990 and 2001 while employment in this sector declined from 37,000 to just over 20,000 in the same period. I am conscious that the recent decision by Greencore to close its plant in Carlow with the loss of the 189 full-time and 137 campaign jobs came as a shock to many people. I am concerned about the personal impact these jobs losses will have on families. I have been in touch with my colleague, the Minister for Enterprise, Trade and Employment, Deputy Martin, and I am aware that Enterprise Ireland is actively looking at replacement jobs for the area. However, the decision to close the Carlow plant was a commercial one taken by the company in light of the increasing competition in the sugar sector and taking into account the reality that changes will occur in the industry as a consequence of the reform of the regime. However, I am glad to note that Greencore's rationalisation programme involves an investment of between €20 million and €25 million in Mallow which clearly demonstrates a commitment to maintaining an efficient sugar processing industry here.

I understand work is to begin immediately on a substantial upgrading of the Mallow plant. To facilitate the one factory operation, beet from the Wexford region will be diverted to Wellington Bridge for transport to Mallow by rail. The company plans a new rail depot to be established in the Carlow region to assist beet growers make their deliveries. I understand a planning application will be submitted to Carlow County Council shortly in this regard. I am confident the company and the beet growers will be able to work out satisfactory arrangements to cope with the new situation.

As Minister, I hold a single special share in Greencore plc. That share has the same monetary value as any other share in the company but has conditions attached which prevent the company from engaging in a number of activities without the prior written consent of the Minister. The special share prevents the disposal of the controlling interest in Irish Sugar Limited or the sugar assets and prevents a single shareholder or group of shareholders acting together from gaining control of Greencore plc. The special share does not allow me to get involved in the operational matters or in the commercial decisions of the board. While I have had several meetings with stakeholders in the context of the forthcoming reform of the EU regime I have had no meetings specifically related to Greencore's rationalisation programme which is a commercial matter for the company.

The issue of the ownership of the quota has been raised in the context of the Commission's proposal to allow the possibility of cross-Border quota mobility. Several member states, including Ireland, are opposed to this idea. The Commission has indicated that if the proposal on quota mobility is maintained it will propose appropriate rules to deal with that situation. In the meantime I have sought the Attorney General's advice on the issue. I am aware that the ownership issue is currently unclear in the European Union.

In facing the future I anticipate that there will be difficult and protracted negotiations on the reform proposal. My overall objective in these discussions will be to protect the viability of sugar beet growing and processing here. I will work vigorously, in common with like-minded member states, towards that end.

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