As the sector pays the price for governments’ populism, it is time for an all new approach
Earlier this month, Australia and Brazil dragged India to the WTO for its market-distorting policies on sugar. Their contention was that the subsidies, including the extent of farmer assistance, far exceeded the norms set by the WTO resulting in higher sugar production/exports which dampen the international prices and, consequently, hurt their domestic producers. This is not the first time India, the second largest producer of sugar after Brazil, has been so accused. While India’s exports at 4.64 lakh tonnes last year is a minuscule part of the global trade estimated at 450 lakh tonnes, what is increasingly worrying the world is its sugar surplus.
Till 2010-11, consistently high sugar surplus was rare in India. A year of high sugar production (and consequently larger surplus) was inevitably followed by a year or two of poor output that used up the surplus. But in the last eight years the sugar cycle has failed and the output has remained high. In 2018-19, the sugar industry is expected to close the season with a surplus that will be as high as 48 per cent of the country’s annual consumption. The government is now grappling with the new reality — how to handle the surplus?
This situation is entirely its own making. In a bid to please the sugarcane farmers, an important vote bank in States such as Maharashtra and Uttar Pradesh (UP), successive governments have announced high cane price. Over the years this has resulted in a huge mismatch between the prices of sugarcane and other crops. Today, sugarcane fetches 60 per cent higher returns than any other competing crop. Assured of both price and market, farmers prefer sugarcane even if they periodically face significant delay in receiving payment.
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