Decontrol needs to balance the interests of the government, industry and growers: Peter Baron

Interview with ED, International Sugar Organization

Notwithstanding the recent controversy over sugar export, the country will remain a major one next year, too. Peter Baron, executive director, International Sugar Organization, whose members represent 86 per cent of world sugar production and 95 per cent of exports, tells Ajay Modi sugar decontrol in India will be a long-drawn process, as the government needs to protect the wider interests of all stake holders. Edited excerpts:

The last time the ISO Council met in India was in 2001. What changes have you witnessed in the Indian sugar industry?
The Indian industry has made significant progress. A decade ago, there was some power production from bagasse but no ethanol. Sugar production has increased considerably, due to better yields and efficiency. India has handled quantities of sugar which we thought the country would not be able to handle and export as well.

Has the Indian government’s approach to sugar changed? Do you see it relaxing controls?
The government is aware that something has to happen and there is a certain preparedness. At the same time, it is not easy for the government, as it requires political stability. The industry only looks at its own interests. The government has to make sure the growing population will be supplied with enough sugar at reasonable prices. This cannot be compromised.

How can the government balance the interests of consumers, farmers and the industry? Is linkage of the cane price to the price of sugar and byproducts a solution?
I think so. It is done like that in many other countries. There is a clear formula that defines every year what share the industry and the farmer will get in the realisation from sales. This formula works. It has worked in Latin America and Thailand. It has a possibility to balance this. But let’s not have illusions. In the Indian context, sugarcane involves 50 million farmers and it (regulation of the industry) is a political power. So, the government has to also take this into account. As a politician, you can only formulate a policy when you are in office and you can’t change it when you become part of the opposition. It is the same everywhere in the world.

Do you see some aspects of decontrol happening in India?
This is far too complex to answer. It is a very difficult process and it will take time. But it is important that both sides agree to do something and move in that direction step by step. The agreement is the first step and it is there already.

How can India reduce the cyclical element in sugar output?
The monsoon can be good or bad. So, there will be a stronger element of insecurity in India than in other countries. There is nothing that can be done (on this). On the other hand, you can breed sugarcane that grows with less water and can be planted in non-traditional areas. These can reduce cycles. But the cycles often are also politically motivated, in the way the sugarcane price is decided completely independent from the sugar price. This is sometimes nice for the farmer, but he is not guaranteed a timely and full payment. I am in favour of a solid process that takes into account three elements - the politician who needs to take care of consumers, the industry which needs profit to survive and the farmers who should get a fair share of the realisation.

Does the global supply-demand situation leave scope for more sugar export from India? How do other exporting nations see an Indian entry in the global market?
Yes, India would be an exporter in the coming year as well. Sugar exporting nations have taken the Indian entry very positively. India has exported so much sugar and still it did not depress global prices. The world is in need of sugar because Brazil did not produce enough last year. If India had not exported, we would have seen prices going through the roof and this would have been very bad for importers. The current price is a good price for efficient producers and importers as well.

India is the (world’s) second biggest sugar producer and biggest consumer. Why is it that no international player has entered India to produce sugar?
You need a certain economy of scale and size to minimise costs. Costs are higher when you are smaller. It comes down to three things. You have to optimise the production process, use good-yielding cane and you have to reduce production costs. If you follow these, you can’t go wrong.