End sweet deal

| Updated on September 09, 2018

The Centre and States need to end their political games and put sugar on par with food crops

Neither India’s policy-makers nor its sugar millers and growers is likely to be thrilled at the news that India will likely overtake Brazil as the world’s leading sugar producer next year. Preliminary estimates suggest that, thanks to good monsoons, India’s sugar output will scale to 350-355 lakh tonnes in sugar year 2018-19, surpassing Brazil’s output of about 300 lakh tonnes. After accounting for carry-over stocks, this would saddle the domestic market with a supply of 450 lakh tonnes against demand of just 255 lakh tonnes. This supply glut may well push mills presently teetering on the brink of bankruptcy right over the precipice. It will also aggravate distress for beleaguered cane growers who are staring at dues of over ₹18,000 crore from the mills this year. The Centre and States have only their own short-sighted policies to blame for this enduring crisis. While Brazil’s sugar economy has acquired both resilience and global competitiveness by being extremely responsive to the fluid demand-supply dynamics of the global sugar trade, the Indian sugar sector is sinking deeper into a quagmire, thanks to policies that try to cosset growers and the industry from inexorable market forces.

By now, it is quite well understood why India’s farmers, despite the stagnating sugar demand, have continued to ratchet up sugarcane acreage at the expense of most other food crops. Rising Fair and Remunerative Prices (FRP) for cane irrespective of sugar prices, giveaways by State governments in the form of ‘advised’ prices and loan waivers, and the onus placed on the industry rather than the Government to guarantee minimum procurement prices, have all combined to make sugarcane a lucrative crop at a time when the MSP promise is ringing hollow for most other produce. While these policies actively encourage higher cane output, they don’t offer any solutions for liquidation of the resulting sugar surplus. While the Centre has devised draconian solutions like production subsidies and minimum export quotas, exports are all but ruled out by global sugar prices ruling a good 40 per cent below Indian production costs. Ethanol blending has been an oft-prescribed solution that has been hamstrung by State policies actively favouring the alcohol lobby. While dismantling the Central and State-imposed shackles on the sector presents a patently obvious solution, the nexus between State politics and the sugar economy has effectively scuttled reform attempts.

But with a water crisis now looming large over India, it has become imperative to de-link politics from sugar so that that the growers’ fatal attraction to this water-guzzling crop can be ended. Both the Centre and States must bite the bullet on ending the special treatment for sugar by letting market signals dictate crop prospects and prices. Treating sugarcane on a par with other food crops and moving from price support to income support for the farmer across crops, is the only way forward to deal with this bitter harvest.

Published on September 09, 2018

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