Sugar Mills Will Be Under Lot of Pressure: Siraj Hussain, Former Secretary Of Agriculture
The Cabinet Committee on economic affairs is expected to take series of decisions related to sugarcane farmers and export relaxations on sugar. This may be another landmark announcement by Indian government post raising MSP’s. Is it a desperate measure to relieve stressed sugarcane farmers’? What will be the possible outcomes of the decision? BW Businessworld speaks to Siraj Hussain, Former Secretary of Agriculture Govt. of India, excerpts:
What may be the possible measures cabinet committee for economic affairs will take for sugarcane farmers in today’s meeting?
I do not know the precise details of proposals which are under consideration of Cabinet Committee on Economic Affairs but the government would be seriously concerned about mounting dues of sugarcane farmers. On 1st June, 2018, the cane price arrears for 2018 sugar season reached Rs 22,645 crore. As a result of several measures announced by the government in May and June, the arrears came down to Rs 17,684 crore on 18th July 2018. It is feared that the arrears may reach Rs 40,000 crore at the end of sugar season 2018-19. So, it seems the government is considering a proposal to provide Rs 4500 crore as assistance to sugar mills to export sugar. Media reports suggest that the government may provide a subsidy of about Rs 14 per 100 kilogram of cane in 2018-19 seasons beginning October, 2018. A proposal to give transport subsidy for export of sugar is also proposed. This will be for moving sugar from the mill to port.
Is it true that continuous record production of sugarcane has only added to complications?
A substantial increase in domestic production of sugar in 2017-18 and crash of global prices of sugar have caused a glut of sugar in the domestic market. The production of sugar has increased from 20.3 Million Metric Tonnes (MMT) in 2016-17 to 32.3 MMT in 2017-18. Our domestic consumption is about 26 MMT. So, there is no way the sugar economy can be managed in this situation of glut. The increase in domestic production is due to higher productivity of sugarcane variety Co 238 which has become very popular in UP. The average recovery of sugar in UP has also contributed to this glut of sugar. The recovery of sugar from sugarcane in UP was only 9.14% in 2010-11. It has increased to 10.84% in 2017-18.
Don’t you find pre-election measures for sugarcane producer farmers as desperate?
Any government should be concerned about the large arrears of farmers. Sugarcane farmers are lucky that governments make all-out efforts to pay them FRP/SAP. Compare it to farmers of Urad or Moong etc. whose farmers fear that if they sell in the open market, they may release only about 50-50 per cent of MSP in this Kharif.
How will the export-related measures impact sugarcane producers as a quick remedy?
Since global prices of raw sugar have fallen from 0.49 US$/Kg in October 2016 to 0.24 US$ per Kg in August 2018, sugar exports are possible only if they are subsidized by the government. In May, 2018, the government announced an incentive of Rs 5.50 per quintal of sugarcane for quantity exported by mills but it was not found viable by sugar mills. The government wanted sugar mills to export 2 MMT of sugar but only about 4.5 lakh tonnes sugar has been exported.
How do you think sugar mills will react to pressure for clearing payment pendency issues?
Sugar mills would be under a lot of pressure to pay cane dues as sugar mills owed Rs 11,618 crore in UP alone (as on 18th July, 2018). The sugar mills are not in a position to pay as low sugar prices did not allow any margin for them.
Isn’t it the time to concentrate more emphasis on ethanol production policies from sugarcane?
The government has done well to encourage production of ethanol directly from cane juice and B-Molasses. Ethanol derived from sugar cane juice will now be bought by oil companies at Rs 59.13 per litre, up from Rs 47.13 per liter. Similarly, ethanol derived from B-molasses will be bought at Rs 52.4 per litre, up from Rs 47.13 per litre. In about two years, I expect large investment by sugar mills in expanding ethanol capacity. Subsidy on interest on loans for ethanol is also a very good move of the government. This will increase the profitability of sugar mills.
Are there chances for a rebound from possible relief measures by the government?
The measures announced by the government on 18th June have resulted in an increase in open market prices of sugar. If the sugar mills are actually able to export sugar and if they are able to sell more ethanol, the sugar mills should be able to partially pay the cane arrears of farmers.
Sugar sector is in need of deep reforms. In 2016-17, when sugar prices were high, it was perhaps possible to implement Rangarajan Committee recommendations on pricing etc. But it needed political consensus and the government made no effort in that direction. In fact, the government wanted the retail price of sugar at no more than Rs 4000 per tonne so that consumers were not hit. We should not forget that two third of sugar is consumed by bulk consumers for commercial use and lower prices of sugar do not result in lower prices of cold drinks or biscuits.
