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LATEST NEWS UPDATES | Drowning in sweetness -Ashok Gulati

Drowning in sweetness -Ashok Gulati

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published Published on Sep 18, 2018   modified Modified on Sep 18, 2018
-The Indian Express

The sugar industry faces a crisis of plenty. Unless bold steps are taken quickly, it can prove costly to the Modi government.

The sugar sector is heading for a major crisis of plenty. India will begin the sugar season (October to September) with a sugar stock of about 10 million metric tonnes (MMT). The industry’s production estimate for 2018-19 is 35.5 MMT, up from 32.3 MMT in 2017-18, against an annual consumption of about 26 MMT. Contrast this with the production of just 20.3 MMT in 2016-17, and one can imagine the enormity of over-flowing stocks. But the real problem is of rising arrears to cane farmers, which stood at Rs 21,675 crore on April 15, up from Rs 8,784 crore a year earlier. And it won’t be a surprise if these arrears spike further by 50 to 100 per cent by April 2019, if no bold corrective action is taken quickly by the government. More than half of these cane arrears will be in Uttar Pradesh. And this may hit the Narendra Modi government hard, politically, as it heads for parliamentary elections, presumably in March-April, 2019.

Before we think of possible solutions, we must get the diagnosis right. The root cause of the mounting cane arrears is that in 2016-17, domestic sugar production was as low as 20.3 MMT, necessitating imports, and domestic sugar prices (ex-mill) crossed Rs 36/kg (see graph). Global sugar prices were also high ($490/tonne in October 2016). This led to an expansion of the area under the crop, and with a good monsoon, improved yield and recovery ratio, lead to dramatic increase in sugar production from 20.3 MMT in 2016-17 to 32.3 MMT in 2017-18, a historic increase of 59 per cent. This production boost substituted imports and replenished stocks, but it became a problem when the world prices of sugar dropped by almost 50 per cent to $244/tonne by August 2018 (see graph), making Indian sugar non-competitive in global markets.

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The Indian Express, 18 September, 2018, https://indianexpress.com/article/opinion/columns/drowning-in-sweetness-sugarcane-farmers-sugar-mills-price-5361328/


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