The government's indecisiveness on several critical issues concerning the sugar sector is likely to be costly for the sugar industry and sugarcane growers. These issues include lifting the ill-advised ban on sugar exports and removal of the remaining controls on the sugar sector. It seems to have been forgotten that it was after a severe slump lasting a couple of years that the outlook turned positive for this sector in the last sugar season (2005-06). The gainer was not the sugar industry alone but also cane farmers, who got good prices plus other incentives for the cane they supplied to factories. The cane price arrears, which had mounted by mid-July to over Rs 19,300 crore, were almost completely cleared, prompting farmers now to put more land under this crop. The industry benefited too, of course, and many businessmen began putting up new sugar factories. In Uttar Pradesh alone, a dozen new sugar plants are in the offing. But the wheel will turn again if the ban on sugar exports continues into the new sugar season, which has just begun. Taking the expansion in sugarcane acreage as an indication, it is clear that sugar production this year will rise by 3-4 million tonnes. In the absence of any domestic demand spurt, inventories will swell unless export markets can be accessed. Unsold stocks would pave the way for another, wholly needless, cycle of declining sugar production and high prices. | |
| It will be recalled that sugar exports were barred in July because of the administration's panic reaction to the general upturn in the prices of essential items. But now, when that fear is gone, there is hardly any ground for continuing with this particular curb. In fact, there is even a case for its immediate removal as, for the first time in years, the international prices of sugar have hardened to levels higher than the level of domestic prices, creating the ideal conditions for India to secure its due share of the global sugar market. Any lapse in capitalising on this opportunity will, additionally, result in needlessly conceding our traditional sugar markets like Bangladesh, Pakistan, Sri Lanka, Indonesia and some Gulf countries to competitors like Brazil, Thailand and others. |
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| The deadline for ending controls on sugar, originally fixed for March 2003 but subsequently extended to October 15, 2005, lapsed over a year ago, but there is as yet no sign of the old rules being given to the birds. This may be because a section of the sugar industry, notably the co-operative sugar sector, of which Food Minister Sharad Pawar is a prominent leader, is still opposing the dismantling of the sugar release mechanism, possibly, for fear of competition. But that alone cannot be the basis for sustaining such a retrograde arrangement, especially after allowing futures trading in sugar. |
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| This aside, the continuation of mandatory packaging of sugar in jute bags, too, makes little sense in the present context. These bags are neither ideally suited for packing a hygroscopic product like sugar nor are cost-effective compared to the alternatives. As such, this provision is tantamount to forcing the sugar industry to support the dwindling jute industry largely for political considerations. It is, therefore, time the government woke up to the realities and did the needful in all these areas in the interest of both the sugar industry and the cane growers. |
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