The Hindu Business Line : Sugar export impasse

The unseemly divergence of opinion within the Government over reopening sugar exports must be resolved. The difference in perception between the Finance and the Food Ministries over the desirability of exports at this point in time needs to be reconciled in the larger interest of the stakeholders. To be sure, there is a mismatch between the Agriculture Ministry's cane output estimate and the industry's sugar production estimate for 2006-07; and the discrepancy needs to be sorted out with caution. The key to a judicious decision on the export policy will depend greatly on whether the country will actually produce 230 lakh tonnes of sugar this year (as claimed by the industry), against 195 lakh tonnes in 2005-06. It is for the Agriculture and Food Ministries, in association with the sugar sector, to come up with justifiable numbers. The Centre is already facing severe criticism of its perceived inability to rein in the rising prices of essential food products, including wheat, pulses, maize and edible oil. In some critical items, the short-to-medium-term price outlook is indeed bullish, for reasons both domestic and international. The Finance Ministry's concern over a possible price spike and consequent political backlash if sugar exports are opened up do seem justified at this time.

Having said that, it bears renewed emphasis that the policy of forcing raw sugar importers to postpone their export obligation is retrograde. If India has any desire to remain a serious player in the international market, whimsical policy changes must give way to a serious, well-considered policy roadmap with a long-term perspective. At this juncture, the least the Government can do is to permit fulfilment of export obligations, so that importing parties are relieved of their contractual duty. After rising to record high levels (driven by tightening supplies and diversion of cane for ethanol), global sugar prices have declined in recent weeks, with little prospect of a major price spike. For 2006-07, a surplus in the world sugar market has been forecast. Meeting export obligations would mean about 10 lakh tonnes may be shipped out, a quantity that would not unduly hurt domestic consumers.

It may also be time for the policymakers to fully liberate the sugar industry from the twin restrictions of levy and free-sale quota. Total decontrol is overdue as the government's vice-like grip has clearly outlived its utility. Decontrol should have happened last October ; but the initiative is lacking even one year down the line. There is no justification for controls any further. The industry should be allowed to fend for itself; it has already had an extended period of handholding. Growers' interests must continue to be protected through the system of statutory minimum price, while consumer interests can be safeguarded through a judicious import policy, with appropriate tariffs.

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