The sugar industry recently saw differences between southern/ western millers and those in the north on procedures to allocate permits for an extra million tonnes of export. Rakesh Bhartia, former CEO of sugar major Bajaj Hindusthan and currently CEO, India Glycols (a chemical manufacturer with a sugar mill in UP), spoke to Ajay Modi on the issues and how things could be improved. Edited excerpts:
Why the divide?
The south and west mills claim the (export) quota policy leads to unnecessary delays, due to hoarding of quotas by northern mills in the hope of a better price in lieu of quota sale. This delays export shipments.
Was doing away with the quota system the only way out?
The quota system was designed to bring equity and no one can find fault with this. However, if this is delaying export for some reason, this can and should be addressed.
What can the government do to hasten exports under the quota system?
Having allowed exports, the government should be indifferent to procedural issues, so long as exports take place and mills use the cash to pay farmers’ cane dues. The industry needs an expedited approval process. The government has done the right thing by bringing in a shorter time for release order (RO) applications. At the same time, the government should not put any condition on the issue of export ROs by linking it to older issues. And, ensure export ROs are issued within a few days of the application. The objective behind permitting export of sugar is to facilitate speedy clearance of sugarcane price payments. So, nothing should delay this process.
Has the quota system been ineffective?
Given that we were able to export 2.3 million tonnes from the 3.5 mt approved, the existing policy has not failed. But the speed at which it got exported is not commendable.
You spent three years as CEO of Bajaj Hindusthan. Do you recall such acute differences between north and south on a policy?
This divide in the sugar industry has been there on many fronts, particularly on export and import. It has come out so visibly for the first time. But these are healthy conflicts that should exist in any industry.
Is the demand by the southern and western mills justified?
It is always appropriate if the industry presents a consolidated view, along with a solution, to the government than a divisive and confrontationist one. A UP-based miller cannot export directly due to location disadvantages. He will be always obliged to sell his quota. At the same time, given that the UP industry is in greater financial distress than the rest of the country due to higher cane costs and lower recovery, a UP miller would be keener to sell his quota so that exports take place and sugar prices stop falling further. I am sure the UP millers are sensitive to this aspect and to that extent, I think the south-west industry is being unreasonable.
How critical is it to hasten export shipments?
Extremely critical. The objective of both government and industry should be to ensure surplus sugar exits from the country, so that domestic prices do not keep crashing. The closing stock at the end of March is even higher than that of 2006-07, when we saw the highest ever sugar production. Clearly, there is oversupply. We also need to be worried that within the next one month, the Brazilian sugar season will start and global prices will come under pressure. So, the Indian industry has a small window of opportunity to export and we should grab this now.