Last week, the Union Cabinet discussed a proposal to lift the ban on sugar exports, but deferred it by a few days. Federal Agriculture Minister Sharad Pawar – whose Nationalist Congress Party (NCP), together with the Congress, has a vast stake in the sugar business – is confident that the ban would be lifted over the next few weeks.
India banned the export of sugar in July, when delayed monsoons led to a spurt in the price of several agricultural commodities, including sugar. The ban was to have been in force till March. But the sugar lobby felt cheated, as the ban was imposed at a time when sugar prices were ruling high internationally.
Prakash Naiknavre, managing director, Maharashtra State Co-operative Sugar Factories Federation Ltd, describes the ban as “a wrong decision at the wrong time.”
Though India had a surplus sugar stock, an over-cautious government slapped a ban on exports, depriving the industry of a huge opportunity in the international markets.
International sugar prices have started declining, so if the ban is lifted, Indian producers would not be gaining substantially, he feels.
In the new sugar season, beginning October, the government expects production to add up to 22.7 million tonnes, up from 19 million tonnes in the previous season – which ended on September 30 – and 13.5 million in the 2004-05 season. India, one of the largest sugar producers in the world, had a carryover stock of nearly four million tonnes last month.
Agriculture minister Pawar estimates that the stock might almost double over the next few weeks; the government would be justified in removing the ban at this stage. India’s domestic requirement is pegged at around 18 million tonnes, leaving a surplus of about 4.7 million tonnes.
The government is expected to impose a cap on exports – of about one million tonnes – though the industry and traders are opposed to any such restrictions.
Many Indian mills had imported raw sugar and have a commitment to export the refined product under an advanced licence scheme. After considering their export obligation of 800,000 tonnes, there is not much scope for other exporters.
International sugar prices have fallen sharply this year on the back of a 3.2 per cent increase in global production, according to the International Sugar Organisation (ISO). There is an excess supply of two million tonnes, which has seen raw sugar prices shed 22 per cent since the beginning of the year.
High sugar prices last year saw several countries raise their production. The ISO fears that the world sugar surplus may soar to 5.8 million tonnes in 2006-07, further impacting the price.
MAHARASHTRA, which is one of the leading sugar producers in India, is facing a major crisis because of the export ban. Sugarcane farmers have turned violent, attacking sugar factories and even the homes of sugar barons. Their leader, Sharad Joshi, has threatened to go on a hunger strike from this week.
Angry farmers recently attacked two sugar factories controlled by state Chief Minister Vilasrao Deshmukh, who like most other Congress and NCP politicians has a huge stake in the industry. There were stone-throwing incidents during the visit of Agriculture Minster Pawar to Sangli in western Maharashtra.
According to the agitators, directors of sugar factories controlled by politicians were looting their crops, even instructing the police to forcefully snatch cane from them.
Maharshtra has seen a bumper production of sugarcane this year following excellent rains. The state expects sugarcane crop of about 60 million tonne, which could result in a record production of seven million tonnes of sugar.
But sugarcane farmers are demanding that the factories – there are over 150 of them, both in the private and co-operative sectors – pay them a higher price for the cane.
Farmers are demanding a minimum price of Rs1,800 per tonne of cane as the first instalment in the current season. They accuse the sugar factories of having defaulted on payments even for the previous season, and many have not even paid the first instalment of the last season. Last year, the sugar factories had offered them a price of Rs1,150 per tonne.
Sharad Joshi’s Shetkari Sanghatana is demanding a price of Rs2,200 tonne, and he has asked farmers in the state not to succumb to pressures from politicians.
Despite the record crops and the buoyant state of the industry, the co-operative mills in Maharashtra are turning sick. Sugar mill owners say they cannot guarantee a minimum price for the crop, and market forces will decide what farmers get for the cane.
Many of the sugar co-operatives have turned sick because of corruption and mismanagement. However, instead of cleaning up the sector, the Maharashtra government and local politicians continue to pamper the industry.
Last week, for instance, the state government decided to guarantee a Rs250 million short-term loan for 18 sugar co-operative mills, all controlled by Congress and NCP politicians.
The Congress and the NCP are partners in the Democratic Front regime in the state. Four of the 18 mills are sick and would be in no position to repay their loans, but despite this the government stood guarantee. Every year, the government extends another Rs1 billion by way of soft loans to the sugar co-operatives.
According to the Comptroller and Auditor General of India, sugar mills owe the state government Rs1.72 billion in principal and another Rs1.91 billion by way of interest. Besides this, billions of rupees owed by the sugar factories have been written off by the government and its financial institutions in recent years.
Not surprisingly, the government’s finances have gone haywire; it is reeling under a debt burden of a whopping Rs1.3 trillion, and is unable to invest in infrastructure, power plants, or other projects.
WHILE the state government is ever eager to shower funds on pampered sectors like sugar co-operatives in western Maharashtra, it has still to come out with solutions to the problems confronting cotton farmers in Vidarbha, a backward region of the state.
Hundreds of farmers have committed suicide in the state’s cotton belt, and despite announcements of ambitious projects, there appears to be no end in sight to the blight affecting Vidarbha.
According to Sharad Pawar, the agriculture minister, there has been a significant fall in the number of farmer suicides in other parts of the country, including Andhra Pradesh, Karnataka and Kerala. In Vidarbha, however, farmers continue taking the drastic step; suicide cases rose from 120 in 2004-05 to 572 a year later. This year, nearly 1,000 farmers have taken their lives.
Surprisingly, none of the six districts of this backward region have faced any major calamities, and the rainfall too has been good this year. But many of the farmers have borrowed heavily from private lenders, who charge extortionate interest rates.
Prime Minister Manmohan Singh, who visited Vidarbha in July, announced a special Rs3.75 billion package for the region. But the number of suicides have risen steadily even after his visit.
There is a strong separatist movement in Vidarbha, as the people there feel that the Maharashtra government has over the years been diverting development funds to the western parts of the state. The government has invested billions of rupees in irrigation projects, many of which remain incomplete and are riddled with corruption, though backward regions like Vidarbha are deprived of funds.
The demand for a separate Vidarbha state is gaining ground, though both the Congress and the NCP are reluctant to even discuss the issue.