FE Editorial : Sweet tooth

The Financial Express
Posted: Monday, Nov 09, 2009 at 2218 hrs IST
Updated: Monday, Nov 09, 2009 at 2218 hrs IST

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: On Friday, wholesale sugar prices in Kolhapur—one of the biggest trading centres in India—touched Rs 34.43 per kg, a jump of almost 2% in a single day. Cumulatively, sugar prices have risen by around 97% in 2009, a huge problem for both consumers and policymakers. The trigger for the latest round of price spikes is the ongoing standoff between sugarcane growers and millers in Uttar Pradesh, the country’s second-largest producer, which has threatened to delay crushing of the already sparse cane crop. Farmers are agitating against the Centre’s new Fair and Remunerative Price (FRP) policy, which guarantees a higher base price than the statutory minimum price, but robs states of their liberty to set a higher price for cane through the state-advised price (SAP) mechanism. On the one hand, growers are arguing that by fixing a lower FRP than SAP, the central government is de-valuing their produce, while on the other hand states are questioning the Centre’s authority in stopping them from setting the price at which sugar mills should purchase the commodity. Uttar Pradesh along with Punjab has openly come out against the Centre’s FRP. Uttar Pradesh has in fact gone to the extent of restricting the movement of imported sugar into the state to maintain law and order after a group of farmers burnt a cargo containing imported raw sugar.

Now the government faces a tricky situation, given the huge political constituency that sugar farmers command both in UP and elsewhere. The basic problem, as we have argued before, lies in the fundamental dynamics of the sugar trade. Controls at every stage, right from the fields, down to the retail consumption level, has crippled the sugar sector so much that even a slight change in the demand-supply situation shakes it from within. Imports could slowly become the norm if the policy changes don’t even out the cycle of boom and bust. To do so, government intervention should be brought down to a minimum so that trade distortions are minimised. Large-scale changes in the Sugarcane Control Order (1966) should be invoked, which will do away with many regulations. Once the determining factor in sugar production and trade is the price mechanism in the free market, protests such as the one in UP will fizzle out. Even now the best hope to end the stalemate is the market—millers and farmers will face the brunt from competing industries like jaggery units...

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» loan waiver

Posted by ajay on 2009-11-11 14:08:30.28833+05:30
This is really understandable because the govt. waived their loans and now have to recover that money from them. This will put them in vicisious circle of taking loans and getting it waived off so that congress can be in power. There are some people who argue that this rise is becuse NDA govt. got the sugar out of ambit of PDS. I know that you will reap what you sow, that is why all have to suffer who voted congress for better tommorow just like for best past 50 years.

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» Sugar turning bitter

Posted by Dr B Sundara on 2009-11-09 09:42:32.088905+05:30
Regarding sugarcane pricing, all the interested parties--millers, farmers, the governments (states and the Centre), and the consumers-- appear to be at loggerheads. This has been resulting in either under production or over production depending on the favourableness or otherwise of the cane price. The sugarcane farmers and the consumers are the victims. But of course most often the millers do not agree with the government policy. That is what one gains from going through some reports in relevant journals. With adequate sugarcane area in the country why we should go for imports is not understandable. May be others produce sugar at cheaper cost than us. Or is that we are not managing our sugarcane agriculture and sugar industry properly? Now-a-days, sugarcane is not used just for sugar manufacturing alone, instead many other products like power (cogeneration), ethanol, paper pulp, biomanure, etc are also produced. Thus cane price need not be linked only to sugar. All the main and co-products may have to be considered while fixing the price of cane and, may be price of sugar too. The other day our agriculture minister was pointing out that the per capita land availability has shrunk to 0.3 hectare and our food security is under threat in view of the rise in population. Whether we will have to depend on imports of food grains and sugar in future despite having abundant production resources? Regarding sugarcane, either a good regulation in which all the parties concerned gain, or a free market sugarcane agriculture and industry may be allowed to function so that things settle on their , may be for the benefit of all.

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FE Editorial : Sweet tooth

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