Sugar industry needs budgetary support for survival and exports
If the Union Cabinet approves the export subsidy, it will enable the mills to export raw sugar to refineries in Asia and Africa at competitive prices 
 
According to the Indian Sugar Mills Association (ISMA), during the current season sugar production for 2014-15 is expected to reach a record 26 million tonnes (mt). Already, the carry forward sugar stocks stand at 7.5 mt that needs disposal plans, in terms of export as well as release in the market.
 
The export subsidy for raw sugar was revised to Rs3,371 per tonne for August-September 2014 and this facilitated the export of 4 mt of raw sugar and 2.1 mt of white sugar. Even though the Food Minister, it is reported in the press, had made recommendations to increase the export subsidy on raw sugar to Rs4,000 per tonne, the Cabinet, unfortunately, is yet to decide on this urgent matter. During the year, it may be noted that the fair and remunerative price (FRP) was set at Rs220 a quintal as against Rs139 a quintal in 2010-11.
 
If the Union Cabinet approves the export subsidy, it will enable mills to export raw sugar to refineries in Asia and Africa at competitive prices.  Both Brazil and Thailand, our serious competitors, will begin their export marketing in a couple of months from now, just about the time, when our crushing season comes to an end, all over the country.
 
The burden of export subsidy non-announcement, continuing permission to import sugar and the government not considering the issue of increased duty or a total ban on this sugar import, interest-free loans to mills and the settlement of arrears to farmers have been playing a vital role in the development of this industry. It would be, therefore, ideal if additional provisions are made in the ensuing Budget to reduce this sort of pressure on the industry. Also, due to the fall in crude oil prices, there appears to be complacency in the ethanol blending programme initiated by the government that incrementally called for 5% blending with petrol to reach 10%. 
 
The issue of payment to farmers is mandatorily to be made within 15 days of commencement of sugarcane crushing, but this also never happens.  Here again, it would be ideal if some sort of documentation system is introduced at the point of entry which will enable the farmer to file his claim directly with the mills' bankers.
 
In the meanwhile, two other major developments that have taken place in the industry. The first refers to the serious attempt in Maharashtra for introduction of farming using drip irrigation, as sugarcane is a water guzzler, with Karnataka following suit.  
 
Karnataka, which is the 3rd largest sugar producer in the country, has shown interest in setting up new sugar mills. Out of the 74 mills, only 63 are in operation, and sugarcane acreage has increased to 4.9 lakh hectares (lh) in 2014-15 from 4.16 lh in 2006-07. Sugar production has also increased to 44 lakh tonnes this season. Both Maharashtra and Karnataka are the only states that follow the Rangarajan Committee recommendation, and the Sugar Board has recently confirmed that there have been no complaints from farmers for delays in payments. However, the President of State Cane Growers Association, Shantakumar, has claimed that this is not so, and that as much as Rs1,800 crore for 2013-14 season is still outstanding!
 
It is interesting to note that there is a sudden growing interest in the establishment of new sugar mills in Karnataka.  According to the information available, as many as 40 Industrial Entrepreneur Memorandums (IEM) are seeking approval from the Centre. This is for both setting up sugar mills and for the expansion of some of the existing sugar mills. This is as advised by HS Mahadeva Prasad, Minister for Cooperation for Sugar, in the State Assembly, recently. Of this 14 are for new units to be set up.  This is an interesting development for the industry.
 
It may be recalled that the Rangarajan committee had recommended the linkage formula for payment and also suggested the abolishing of State Advised Price (SAP), which was higher than the FRP (Fair and Remunerative Price) fixed by the Centre, besides to permit the mills to sell sugar freely in the open market.  The clash between SAP and FRP has been the main area of dispute in the case of UP. The Budget may also bear this in mind in finally settling the issues of this industry
 
A realistic and farmer friendly budget that takes care of the ills of the sugar industry would be welcomed.
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
Comments
Chandragupta Acharya
7 years ago
The sugar sector is one the best (worst) examples of how government regulation can completely ruin a sector. The extent of regulation in the sector is insane. Despite a bumper crop: 1) Farmers do not get their dues on time 2) Mills complain of losses 3) Buyers do not get lower sugar prices. How can all the three stakeholders in a situation lose? It is beyond my understanding.

Even the Rangarajan committee recommendations are half baked. What is needed is a total decontrol of the sugar sector – from farm to store. It may cause some pain in the short run, but everyone knows it will be good in the long run. That is what we expect from Modi sarkar – not minor tinkering here & there.
Sugar is not an essential commodity for survival. I am prepared to go without sugar, but I don’t want to subsidize foreign buyers.
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