Addressing Sugar Sector Crisis

What is the issue?

The sugar sector is beset with a crisis with high production, low prices and accumulation of sugarcane price arrears.
It calls for swift actions from the Centre and State governments to address this.

What are the concerns?

The crisis is part of the cycle of ups and downs in the supply and prices of sugarcane and sugar.
Sugarcane price arrears payable by mills to farmers have been accumulating.
The total unpaid dues of farmers crossed Rs 160 billion in March-end, 2018.
It reflects a liquidity crunch in the sugar industry.
Also the financial deprivation of farmers who have already supplied their produce to factories is obvious.

What are the measures taken?

Measures - A series of measures were taken by the Centre to balance the high production.
This was done through exports and stabilising sugar prices.
The measures include:

Government's market measures have achieved little because of the slump in the international market.
Such piecemeal moves are unlikely to bring in a lasting solution.

What are the Rangarajan committee recommendations?

The C Rangarajan committee report has made recommendations on sugar deregulation (Click here to know more).
The Centre has accepted the report in 2013 and implemented some of the recommendations.
These include lifting the levy on sugar production and doing away with the monthly release mechanism for open market sale.
States - The relatively more crucial recommendations of the committee were left to the states to accept and implement.
However, the states' pace of action in this regard leaves much to be desired.
The most pertinent recommendation is to abandon the system of state advised prices for sugarcane.
It was suggested to be replaced with the revenue-sharing formula.
Under this, 70 to 75% of the revenue generated by the mills from the sale of sugar and its by-products is shared with cane suppliers.
It balances the interests of cane producers and the sugar industry.
It lets the production of both sugarcane and sugar to be dictated by market demand.
This has not been conceded by most states, barring Maharashtra, Karnataka and, recently, Tamil Nadu.
Farmers - The farmers are now turning suspicious of the revenue-sharing formula.
The apprehension is that sugar factories always show losses or very little profits.
This denies the farmers their legitimate stake in the revenue.

What is desired?

A sound long-term strategy is the need of the hour.
Linking the prices of inputs (mainly sugarcane) with those of the output (sugar and by-products) is crucial.
States have to act swiftly in implementing the C Rangarajan committee report suggestions.
The revenue-sharing model, indeed, holds the key to production and price stability in this sector.
Better supervision and audit of sugar mills’ accounts is imperative to restore the farmers’ confidence in revenue sharing formula.

Source: Business Standard