Wanted: measures that can raise sugar prices

Yet another package for the sugar industry has been announced; but the structural issues facing the sector are unlikely to be resolved.

Faced with surplus stocks for the fifth successive year, the sugar sector is in dire need of measures that can ease its inventory burden and help boost prices. Sugar prices have been hovering below the cost of production for millers for several years now. The industry’s plea for creation of a buffer stock to steady prices seems to have fallen on deaf years. Another option the Centre could have explored is bringing back the release mechanism, which could have lent some support to prices.

The carry-forward stocks for the 2015-16 season starting October will be a record 10 million tonnes. Amidst a global glut and depressed prices, the surplus will continue to weigh on the domestic prices. The surplus can be removed from the systemeither by creating a buffer or exports. Though the government announced the subsidy for raw sugar exports in the current season, the intervention came too late and by that time, shipments had become unviable with global prices slumping.

The problem the sugar sector is facing is that the interest-free loan will not be enough to pay the dues to farmers. Dues to farmers are reported to have increased to ₹21,000 crore.

That leaves mills with almost nothing and they get no breather with the next season round the corner.

Lower crude oil prices, too, spell problems for the sector. With crude oil being cheap globally, Brazil growers will be diverting more cane for sugar than for ethanol. Thus, the sector is facing a double whammy.

Considering that the forthcoming 2015-16 cane crop is bigger than the current one, the government should announce its policy for the sector – be it in the form of announcing a subsidy for exports and enhance the quantum of eligible shipments or bringing back the release mechanism or creation of buffer, well ahead of the season. Such a move would help millers plan their crushing season and in turn boost the market sentiment.

The unseasonal rains that wreaked havoc in parts of the country have proved beneficial for the sugarcane crop in key States such as Maharashtra and Karnataka, where not only the yields but also the recovery is likely to be higher next year.

Despite pending payments, farmers continue to plant more. Sugarcane is a sturdy crop that can withstand the vagaries of nature. It is also considered a secure crop as the Centre fixes the fair and remunerative price and several key States announce their own State advised price, which normally is a mark-up on the FRP.

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