The Hindu Business Line : Sugarcane output estimate revisions cost industry, growers dear

New Delhi, Feb 10 Official statistical data being subjected to upward or downward revisions is considered an ‘acceptable’ practice, so long as it does not lead to any marked divergence between the original and final numbers.

For instance, the Central Statistical Organisation’s (CSO) national income estimates for any given year keep changing, as these progressively evolve from the ‘advance’ to the ‘revised’, ‘quick’, ‘provisional’ and ‘final’ stages. The gap between the ‘final’ and ‘advance’ growth rates, nevertheless, is normally well within 100 basis points.

But when it comes to the Agriculture Ministry’s estimates of sugarcane production, there are no such apparent limits. In its ‘first advance estimate’ of September 15, 2006, the Ministry had assessed the size of the 2006-07 crop at 283.4 million tonnes (mt). This figure has since been successively revised upwards till the ‘final estimate’, which was released on Thursday, put it at 355.52 mt.

In other words, a difference of over 72 mt or more than a quarter of the initial projection!

Such huge re-assessment in normal circumstances would merely have generated amusement or provoked academic concerns over official data collection and estimation methodologies.

However, in this case the Agriculture Ministry’s crop estimates going haywire has proved costly in ‘real’ terms. For, it was the Ministry’s original projections — of cane output rising marginally from 278.39 mt in 2005-6 to 283.40 mt in 2006-07 — that formed the basis for the ban on sugar exports from July 2006 extending right until January 2007.

The adverse impact of this on sugar industry and cane growers — following loss of export business at a critical period when London white sugar was quoting at $450-500 per tonne levels — is too well known. As it finally turned out, the increase in cane production was from 281.17 mt to 355.52 mt, with sugar output correspondingly rising from 19.27 mt to an all-time-high of 28.33 mt in the 2006-07 season.

But by the time official realisation on the extent of glut dawned, global prices had slumped to about $330 a tonne and falling to as low as $260 a tonne towards September (they have since recovered to around $340 a tonne now). The result: not only did the ban on shipments have to go, but the Centre was further forced to dole out a package of export subsidies, concessional bank finance and buffer-stock creation to bail out the industry.

Questions on the Agriculture Ministry’s estimation methodologies are not restricted to just sugarcane but even cotton. The Ministry’s estimates of cotton production at 184.99 lakh bales (lb) in 2005-06, 226.32 lb in 2006-07 and 233.81 lb are much below the corresponding numbers of 241 lb, 280 lb and 310 lb put out by the Cotton Advisory Board (CAB).

There is general consensus that the projections by the CAB — a representative body drawn from the Textiles Ministry, the trade and the growers — are closer to the ground situation.

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