Sticky prospects

Reports trickling in from Tamil Nadu, of the dry spell in the State threatening the standing sugarcane crop and pruning new plantings for 2017 by half, should have both food and agriculture ministry mandarins sitting up and taking note. India’s sugar economy is already in a sticky situation, with output for the 2016-17 season (October to September) expected at 203 lakh tonnes, a 20 per cent drop from last year and 15 per cent less than the yearly requirement of the sweetener. Repeated downward revisions in production estimates, and a consequently unprepared market, have led to average retail prices for sugar firming up by 22 per cent year-on-year to over ₹42 a kg. The Centre has scrambled to quell the price rise through its usual fire-fighting tactics of imposing stock-holding limits and slapping an export tax. But in taking stronger measures — such as importing refined sugar or waiving import duty — it is in a Catch-22 situation.

If soaring sugar prices are undesirable for consumers, they are glad tidings for cane farmers and millers reeling from six consecutive years of surpluses, when market prices dipped well below costs. In fact, after cobbling together a compromise solution this year, it is imperative for the Centre to quickly turn its attention to crop prospects for 2017-18. True, industry forecasts suggest that the shortages are temporary, given carry forward stocks of 37-40 lakh tonnes, the record crop expected in Uttar Pradesh, and a likely rebound in Karnataka and Maharashtra. But it would be best for the Centre to take such early projections with a pinch of salt, and to rely on its own data for an independent assessment. The industry body’s 2016-17 forecast was revised downwards thrice, with output now a good 30 lakh tonnes below the initial number. As sugar is a seasonal crop, with peak production between October and March, the Centre needs to be proactive with interventions such as imports or duty cuts, timing them to the lean season. This is essential to help balance the interests of consumers with those of farmers.

But quite apart from dealing with the vagaries of the sugar cycle, the Centre must also persuade the key sugar-producing States to kick-start structural reforms in the sector. With more States now under the NDA fold, it shouldn’t be too difficult for the Centre to oversee the dismantling of draconian laws on area reservation for cane and movement of alcohol and molasses, which prevent farmers from realising better prices for their produce. Populist increases in the ‘advised’ price for cane, especially by States such as Uttar Pradesh, contribute to Indian sugar being expensive and uncompetitive in global markets. Quite apart from helping consumers, realistic cane pricing will also nudge farmers to shift their cropping patterns away from this water-guzzling crop towards much-needed staples such as pulses.

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