Sugar politics

The reversal of the sugarcane pricing policy, which had been announced by the Central government through an ordinance last month, was not unexpected. A policy that hurt the interests of farmers in states which account for the highest sugarcane acreage and production could not be defended, even if it had many good points. Therefore, the government had to beat a retreat and drop a section from the ordinance which would have denied the farmers the rightful price in some situations.

The new policy was good to the extent that it sought to bring about uniformity in cane prices. It also sought to address the problem of state governments announcing State Advised Prices (SAP) over and above the Centre’s Statutory Minimum Price(SMP), resulting in price increases of sugar. The idea of a fair and remunerative price (FRP), that was introduced, made it obligatory for states that  fixed a higher price to pay for it. But since this was not possible, only the sugar mills would have gained. In UP the FRP is about Rs 130 while the SAP is 160. Now the difference between the two has to be paid by the mills.

The pricing of sugarcane has always been distorted because of the politicisation of the industry. The problem becomes acute in times of shortage like this year, when production is expected to be about 7.5 million tonnes short of demand. The acreage is less because three successive years of good crop has put a cap on prices and on farmers’ income. But it was wrong to allow only the sugar mills to gain from the shortage in output and the high prices of the commodity.  Sugar policy should ideally take into consideration the interests three main groups – cane growers, mills and consumers. Very often the policy is seen favouring one or the other, depending on the existing circumstances and political considerations. This is not the ideal situation for a country which is the highest consumer and the second largest producer of sugar in the world.

The government has only solved a political problem, and the solution is temporary. Excessive regulation has prevented reforms in the industry. It may not be possible to decontrol the industry at one go. If the regulation is done by an independent body and not by governments, the pricing process, which is often the most problematic, will be fairer and more rational. That should be the goal for the government.