The wounds are self-inflicted on the sugar industry because the industry willfully played a mutually beneficial tournament with the political parties that periodically milked it by treating both the raw material front sugarcane growers and the crushing mills as the eternal elixir for funding all its shenanigans. Nowhere this is candidly conceded than at the 79th Annual General Meeting of the Indian Sugar Mills Association (ISMA) recently in the capital when the outgoing President Mr.M.Srinivasan bemoaned that “the vote bank politics has resulted in irrational increase in the sugarcane price fixed by the State governments which is substantially higher to the fair and remunerative price (FRP)”. It may be noted that the FRP is a benchmark guaranteed price based on the recommendation s of the Commission for Agricultural Costs and Prices (CACP) after prior parleys with the State governments and other stakeholders.

Corroborating this wound willfully inflicted by the sugarcane producing States’ governments that foist on the hapless industry a disproportionately heavy burden on the industry, the ISMA ex-President cited what the Central government fixed for 2013-14 sugar season (October 2013 to September 2014) at Rs 210 per quintal linked to a sugar recovery of 9.5 per cent. Protesting against this FRP, agitations were resorted to across s the nation by the sugarcane growers for Rs300 per quintal and in some places these are not even linked to the recovery ratio.

The State governments by and large seldom deemed the Centre’s cane price as a threshold but instead went ahead with their own jacked up price, leaving the larger issue of who would take up the inflated sugarcane cost to the crushing mills. As a result of this drift, rifts regularly broke out among the stakeholders with the country’s age-old sugar industry witnessing tough time in the light of recurring sugar production glut, high unsold stocks and mounting cane arrears to farmers. Some 70 of the 100 big private sugar mills in Uttar Pradesh, the second biggest sugar producing State, suspended operations for ten days last month, pleading inability to pay the price fixed by the State governments.

It is paradoxical that while the Sugarcane (Control) Order 1966 stipulates payment of cane price within 14 days of supply failing which interest at the rate of 15 per cent per annum on amount due for the delayed disbursal is payable, the powers for enforcing this provision is hardly exercised by the States as they have obvious gains to be oblivious to the onus on the mills such interest burden casts! This is where the sordid nexus needs to be fixed and the industry and the cane growers to be weaned away from the baleful sway and spell of the political class on the stakeholders, policy analysts quip.

As a corollary to the profligate policy of the States in invariably increasing the sugarcane price for the mills, it is estimated that over the last four seasons, cane payments arrears in Karnataka had doubled from Rs 600 crore to Rs 1200 crore, in Maharashtra from Rs 500 crore to Rs 900 crore and in Tamil Nadu from Rs550 crore to Rs 950 crore. Amazingly in UP, this arrears assumed humongous dimensions from Rs 1385 crore to Rs 7779 crore. As a result of this pampered policy of not letting down cane growers by guaranteed higher purchase prices from mills, keeping the consumers happy by re-jigging export-import curbs to balance demand –supply equations when it go haywire and to stand by the industry when the burden becomes too unbearable through bailout packages, the Centre together with States had perfected the legerdemain to keep everyone sick!

It is small wonder that the sugar industry is today reduced to a travesty of what the control regime can wreak and keep it weak in perpetuity! India might have ushered its economic and trade policy reforms more than two decades ago by a visionary and non-dynasty Prime Minister the late Narashima Rao, but the nasty remnants of control regime remain to be unshackled ranging from cricket to sugar industry if only to cleanse politics of slush money hunt or funding electoral battle on the sweat and blood of kisans or aam Aadhmi or industry. No wonder at the ISMA annual conclave the industry pitched for dismantling the lingering relics of the controls on the industry.

Though several Committees in the past—Mahajan, Tuteja, Thorat and Nanda Kumar to name a few—plumped for decontrol of the industry down the decades, nothing had been done till the Rangarajan Committee made a fervent pitch for the same in October 2012. In a sort of relief to the industry reeling under inordinate disabilities to operate even to its barest capacity, the UPA government dramatically lifted the major logjam on how sugar is sold by the mills on April 4, 2013. No longer mills were required to give levy sugar; nor are they subject to any regulated release mechanism that at once gave them the respite they sorely need to survive in the face of unsustainable operating expenses.

However, the key suggestion on revenue-sharing between sugarcane farmers and sugar mills has been sidestepped. Many a stakeholder genuinely feels that the crisis in the industry could have been averted if only the sugarcane producing States, particularly Uttar Pradesh accounting for the substantial chunk of the output had implemented this crucial recommendation instead of going ahead and announced their own prices for procurement by the mills. But that was not to be and hence the decision by an informal group of Ministers for a bailout package that includes interests-free loans adding upto Rs 7500 crore with favourable repayment terms, restructuring of extant loans, spurs for production of four million tonnes of raw sugar for exports and doubling of ethanol blending in petrol to 10 per cent, even as the existing five percent before June 30, 2013 deadline had not been implemented.

But as its wont, the authorities and the political dispensation found it convenient to arrange this reprieve by flogging the dead horse of the public sector banks for their abject failure on the policy realm to take up the tab! In the process, how to ensure fair and plausible margins for both cultivators and the sugar mills and keeping the interests of the consumers are left high and dry. Analysts say that this is not the way to go if the market forces are so ineptly managed by the political classes even as they go abroad wooing overseas investments! (IPA)