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:
- doubling of import duty
- abolition of export duty
- mandatory export of 2 million tonnes of sugar
- fixing the quota of sugar that each mill can sell in the domestic market
- 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
