Home > Agriculture, Sugar > Sugar Industry in India anxious to be decontrolled

Sugar Industry in India anxious to be decontrolled

The sugar industry is heading towards a glut in the current year from the deficit it faced in the sugar year October 2008-September 2009. This has made the industry participants anxious. Right from demanding re-imposition of customs duty on imports of sugar to deregulation to considering a new cane pricing formula, they are trying it all.  

With lower sugar prices, the sugar companies plan to increase their revenues and support the fall in profits by raising revenues from other businesses including distillery and power co-generation operations. While earlier they did not consider sharing profits/revenues from sugar by-products with the farmers, they are now showing a carrot to the farmers by considering a new cane pricing formula in which they would share two-thirds of their realisations from not just sugar, but even molasses and surplus bagasse, with farmers.

For every quintal or 100 kg of cane crushed, mills produce roughly 10 kg of sugar, 4.5 kg of molasses and 30 kg of bagasse (of which 21-22 kg is used for meeting in-house steam consumption requirements, leaving a surplus of 8-9 kg). Reports claim that at current ex-factory realisations of Rs 25/kg for sugar, Rs 2/kg for molasses and Rs 1.10 for bagasse in Uttar Pradesh, the gross realisation from sale of 10 kg sugar, 4.5 kg molasses and 8 kg bagasse would be around Rs 268. Two-thirds of this would work out to nearly Rs 180 a quintal for cane.

The main objective of the industry participants is to be decontrolled. “The Government should free us from all levy and release mechanism obligations, and allow prices of all our products to be market-determined. Once that happens, cane prices can be fixed based on a transparent formula acceptable to growers as well”, states a representative from ISMA.

The Government intervenes in price determination as well as regularises the quantity of sugar that a mill can sell its regulated release mechanism on a monthly basis. The releases are categorised into:

  • Free sale sugar quota –quantity that mills can sell in the open market
  • Levy sugar quota – The quantum to be given to the government for sale through the public distribution system

Free market prices are also controlled through the monthly release mechanism, in which the government determines the amount of sugar that mills can sell in the open market during a month, depending on the production and inventory levels.

With sugar being a politically sensitive issue, it seems highly unlikely that the politicians will risk freeing the industry as it has a direct implication on their votebank.

Advertisements
Categories: Agriculture, Sugar
  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: