Bitter-sweet

Sugar prices in the country are now at their highest in three decades and are moving towards Rs 40 a kg at the retail level. The spike in food price inflation is mitigated by the availability of ample stocks. But there is no such cushion for sugar and imports are the only means to ensure supplies and to keep the prices from soaring. The government has allowed duty-free import of eight lakh tonnes of sugar but it will not have an impact on prices. India is the largest consumer of sugar in the world and the large import order has pushed up international prices. In fact the world market had anticipated the shortfall in India’s sugar production and the prices had already gone up. Ironically, the Indian government did not foresee the fall in production and failed to take any step in time to deal with the situation.

Sugar output has fallen for the second year in a row and is poised to fall further next year. There is a reduction in the crop area for next year and the poor monsoon will reduce the yield of the water-intensive crop. The attractive support prices offered for foodgrain crops and the uncertainty about the monsoon have weaned many farmers away from sugarcane to other crops. Realisation of cane prices from the mills is also a big hassle for farmers. Therefore, the government now has to plan not only for the festival season when demand will be high but also for the coming year.

It is not easy to set right the sugar economy which is highly regulated and politicised. Governments have not learnt any lessons from past experiences of scarcities. An immediate measure that can be implemented is ensuring adequate availability of sugar through the public distribution system. For this the government may have to buy more than the levy quota of mills. The Centre also may have to go in for more imports.

Marketing restrictions imposed on mills in the case of free-sale sugar may need to be relaxed. These controls also encourage mills to divert cane for production of ethanol and gur. The new planting season is not over and farmers may be offered attractive incentives to at least maintain the acreage for next year. Only increase of production and removal of distortions in the sugar economy can solve the problems in the long run.