INDIA: Industry seeks options to get out of sugar glut

Published: 02/05/2018, 2:56:55 PM

With the Finance Minister's recent announcement that minimum support prices for crops be at least 50% above their cost of production, sugar experts caution that such a pro-farmer approach may have negative effects for the sugar industry, reports Sugaronline.

Atul Chaturvedi, one of the board members of Renuka Sugars, told Sugaronline on the sidelines of the Indian Sugar Summit held late last week in New Delhi that "support prices are declared for 23 commodities, but India needs to review them and declare them (only) for the crops that it needs to produce and are in demand in the market. Farmers should be dis-incentivized to not produce the crops that India doesn't need".

Pasha Patel, Maharashtra's Agriculture Cost and Pricing Commissioner, told Sugaronline that New Delhi should consider opening up exports as banning export of sugar is a bad idea, an idea also held by Abinash Verma, the Director General of Indian Sugar Mills Association. Verma says the current 20% export duty imposed on sugar mixed with subdued global sugar prices have made Indian sugar uncompetitive in overseas markets unless export subsidies were implemented.

"Sugar prices in the country are collapsing as India probably could end up producing over 26 million metric tonnes in the current year. That has led to a fear in the market and we may witness delay in the cane payments to farmers. That will further aggravate the situation on cane arrears in future. So, this fear needs to be addressed," said Chaturvedi.

Instead, he suggested the government contemplate something like the price-deficit payment scheme developed by the Madhya Pradesh government, which has been quite successful in dealing with the problems arising out of the soybean glut. Under this scheme, the state government pays the price difference of market price and the floor price to the farmers to help them deal with correction in soybean prices.

Another option, Gaurav Goel, Managing Director, Dhampur Sugar Mills Limited and President of ISMA, told Sugaronline, are price deficit payments similar to the Revenue Sharing Formula.