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Wednesday, 5 June 2013
Page: 5283

Mr SIDEBOTTOM (BraddonParliamentary Secretary for Agriculture, Fisheries and Forestry) (09:02): I move:

That this bill be now read a second time.

The Australian sugar industry, comprising more than 4,000 farms across Queensland and northern New South Wales, is an important contributor to regional economies in these areas and the Australian economy in general.

It produces on average 34 to 38 million tonnes of cane per season, which equates to approximately 4.5 to 5.5 million tonnes of raw sugar, with a gross value of production of $1.5 to $2.5 billion.

More than 80 per cent of this sugar is exported, making Australia the third largest raw sugar supplier in the world.

As with all industries, particularly those that are heavily export dependent, research and development underpins the competitiveness of the Australian sugar industry. It drives productivity improvements and ensures the economic viability of the industry. It also generates significant flow-on effects to the broader community and economy in terms of regional development, exports and employment opportunities.

It is vital that research and development is delivered in the most effective and efficient manner.

With this in mind, the Australian Sugar Industry Alliance undertook a review of research and development arrangements and recommended reform of these arrangements to best meet current and future needs.

On 22 September last year, it submitted a proposal to the Australian government asking it to restructure research and development arrangements.

Under these reforms, the Sugar Research and Development Corporation , or SRDC and BSES Limited will be wound-up and their assets and research and development functions, along with the research coordination activities of Sugar Research Limited, transferred to the industry owned company Sugar Research Australia Limited, which was established on 8 May 2013.

Under the proposal, the statutory levy will increase from 14c per tonne to 70c per tonne of sugar cane that is processed or sold for processing, shared equally between growing and milling businesses. Thirty-five cents a tonne will be paid by the growing business and 35c a tonne by the milling business.

While this is a significant increase, the new statutory levy will also replace the BSES Limited service fee for both growers and millers.

In considering the proposal, the government looked at other options, including continuation of existing arrangements. It also took account of objections received during the formal six-week objection period, of which there were eight, and other representations on the issue.

The government determined that, on balance, this proposal represents the best mechanism for long-term delivery of research and development to the sugar industry.

This view is supported by the industry itself. All levy-paying businesses had the opportunity to vote on the new arrangements, including the increase in the levy, in a poll of all levy-paying businesses run by the Australian Electoral Commission in a poll in August 2012. Eighty-four per cent of those growers who voted supported the proposal. This represents 64 per cent of all cane growers. Seven of the eight milling businesses also voted in favour.

The changes will build on, rather than replace, current arrangements.

The knowledge and expertise of BSES Limited will not be lost but will transfer across to the new industry owned company. Similarly, the research and development knowledge that has been facilitated and funded through SRDC will remain publicly available, as will that generated by Sugar Research Australia Limited.

Operating one industry research body should deliver increased efficiencies. The new company should have the capacity to better integrate and avoid duplication of research and development activities across the sugar industry supply chain, leading to a wider range of research opportunities and increased industry and public good benefits.

Incorporating the existing sugar statutory levy and voluntary contributions under a new statutory levy will eliminate free-rider problems, as all industry members that benefit from research and development services provided by Sugar Research Australia Limited will now contribute the same amount to its operation through the new statutory levy.

The change should, therefore, create a stronger national research and development capability, establish equity in the industry in relation to financial contributions to R&D and provide certainty to growers and millers about their liabilities and the amount of funding that will be available for research and development.

There will also be reduced compliance costs for levy payers with growers and millers paying fewer individual levies and fees.

The bills before you today, the Sugar Research and Development Services Bill 2013, and its companion bill the Sugar Research and Development Services (Consequential Amendments and Transitional Provisions) Bill 2013, provide the mechanism to implement key elements of reform of sugar R&D arrangements.

The bill, which commences on the day after it receives royal assent, provides the Minister for Agriculture, Fisheries and Forestry with the power to enter into a funding contract with an eligible company, currently proposed to be Sugar Research Australia Limited, to enable it to receive and invest levies collected by the Commonwealth for research and development. It will also allow it to receive the Commonwealth's matching funding for eligible research and development expenditure up to a determined funding cap.

Once the funding contract is in place, and the minister is satisfied that Sugar Research Australia Limited will comply with its contractual and statutory obligations, the minister can declare the company with which the contract is made to be the industry services body.

The companion bill makes consequential amendments to a number of acts and regulations to ensure the new arrangements operate, as intended, in respect of the imposition and collection of the levy, including provision for the increase in the levy rate on 1 July 2013.

It also covers matters arising from the transition to a new industry services body such as the transfer of assets and liabilities from SRDC to the industry services body and the wind-up of the SRDC on 30 September 2013.

While the government supports the proposal, it is also conscious of the need to make sure that appropriate governance arrangements are in place and, where appropriate, are reflected in Sugar Research Australia Limited's constitution.

In this regard, the government has made sure that issues such as accountability to government and members, protecting the rights of levy payers, appropriate consultation and the operation of Sugar Research Australia Limited as both a funder and provider of research have indeed been addressed.

The government worked closely with the Australian Sugar Industry Alliance in the development of the constitution for Sugar Research Australia Limited to make sure it supports, among other things, a suitably skilled and independent board and the rights of all levy-paying members to be treated equitably.

Sugar Research Australia Limited will be unique among rural research and development corporations as both a purchaser and provider of research. Sugar Research Australia Limited's constitution requires it to ensure the sugar industry is supported by research capability from a range of providers. In addition, and noting the potential for conflict of interest, there will be explicit governance oversight of this issue by the Audit and Risk Committee of Sugar Research Australia Limited.

The contract between the Commonwealth and Sugar Research Australia Limited, commonly referred to as the Statutory Funding Agreement, will also play a key role in achieving this objective.

The Statutory Funding Agreement will set out the expectations of the government in relation to the prudent management of industry and Commonwealth funds and the development of strategic and annual operating plans.

The Statutory Funding Agreement also requires the development of an agreed industry consultation plan and priority setting process. It is important that this is in place to both guide and ensure a broad industry consultation process. It is appropriate for all industry levy payers to be consulted on the operation of the company and to contribute to its priority setting processes.

In line with government policy, the Statutory Funding Agreement will require Sugar Research Australia Limited to identify extension pathways that will facilitate the adoption of its research and development outcomes. Every three years, it must undertake a performance review to assess the company's effectiveness in meeting the priorities, targets and budgets outlined in its plans, and its performance in meeting the obligations of the funding agreement. Final performance review reports will be publicly available.

With the Statutory Funding Agreement and the revised constitution, the government is confident that the governance arrangements for the new organisation will satisfy transparency and accountability requirements and support an efficient and effective organisation. This, in turn, should contribute to increased productivity and profitability for the sugar industry.

Debate adjourned.