India’s sugar sector has faced challenging times in the recent past in the wake of high cane arrears. The current sugar crushing season commenced on a brighter note for the sugar industry as the ex-mill sugar prices rose to Rs 34/- per kg i.e. more than the minimum selling price or Rs 31/- kg will help in better realisation of the stocks with millers. This price has increased as the sugar production is expected to decline in 2019-20.
The First Advance Estimate (AE) of production of sugarcane released by the Department of Agriculture, Cooperation and Farmers Welfare (DACFW) is 3,776.66 Lakh MT for 2019-20 as compared to Fourth AE of 4,001.57 LMT for 2018-19. However, availability is assured as we are entering the new sugar season with ample carry over stock, of which 40 LMT is buffer stock created by the government alone.
Given the challenges faced by the sector being multi-dimensional and complex, the solutions need to be holistic and comprehensive. The major concerns which need to be addressed here are: (i) price stability; (ii) mechanism to liquidate stocks with sugar mills, and; (iii) alternate uses of the piling stock to avoid glut in domestic as well as international markets. These three concerns are inter-related to each other and a balanced combination of these can ensure that the sugar tastes sweet.
Price stability can be achieved by ensuring that the Demand and Supply gap is minimised. Recently, India recorded bumper levels of production of sugarcane & sugar, which resulted in relatively greater carry over stocks for the succeeding year due to lowering demand.
Oversupply of sugarcane lately and signs of a shift in preferences away from sugar have led to a fall in sugar prices limiting sales realisations. Further, sales dampened due to glut in the market. These tightened the liquidity position of millers, as they faced working capital constraints leading to difficulty in obliging the assured Fair and Remunerative Price (FRP) payments to farmers. A global oversupply of sugar also resulted in global prices of sugar remaining subdued thereby blunting the competitiveness of Indian sugar exports.
Here, the government intervention came in as a rescue for both our farmers and industrialists. The initial announcement of Minimum Selling Price (MSP) for sugar of ₹29/kg. ex-mill by the government provided a major fillip in boosting the finances of millers. Later, hike in MSP to Rs 31/kg ex-mill has taken this a step forward posing no serious threats to consumer budgets. The government package of Rs 6,268 crore of sugar export subsidy has boosted the morale of producers as they will be able to liquidate 60 LMT of sugar at an export subsidy of Rs 10,448/- per tonne.
The Ethanol Blending in Petrol (EBP) programme can be of great help in achieving our commitment towards the Sustainable Development Goals of climate action and affordable and clean energy. We have come a long way forward from 0.67% ethanol blending in 2012-13 to 6.20% as on June 17, 2019. The recent government policies to provide subsidised interest loans of Rs 6,000 crore, twice in two years, to millers to expand their capacity for production of ethanol, in line with the target of achieving 10% ethanol blending with petrol by 2022, is a step welcomed by the industry.
The Cabinet Committee on Economic Affairs (CCEA) recently decided to increase the prices of ethanol from ‘C’ heavy molasses and ‘B’ heavy molasses by 29 paise per litre and Rs 1.84 per litre respectively, thereby making their prices Rs 43.75 per litre and Rs 54.27 per litre, respectively.
Increased ethanol blending in petrol is expected to replace 2 million tonnes of oil annually, helping save $1 billion (Over Rs 7,100 crore) in import bill. Hence the need to diversify the use of sugarcane/ sugarcane by-products to alternatives such as ethanol is crucial.
Further, in the best interests of long-run sustainability, there is a serious need to review the cropping pattern which is being followed in India. There is a need to relook into the incentive structure of MSP, heavily subsidised electricity, water and fertilisers to align cropping patterns in the country based on region-wise resource availability/constraints and suitable demand/consumption preferences.
The water guzzlers, paddy and sugarcane, consume more than 60% of irrigation water available in the country, thereby reducing water availability for other crops. Around 89% of groundwater extracted is used for irrigation and crops such as paddy and sugarcane consume more than 60% of irrigation water. The focus should shift from land productivity to ‘irrigation water productivity’. Therefore devising policies to incentivise farmers to improve water use should become a national priority. Thrust should be on micro-irrigation that can improve water use efficiency.
(Sachin Bansal and Venkat Hariharan Asha work as Junior Statistical Officer and Assistant Director, respectively, in the Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution, Government of India)