Recently there were violent protests by sugarcane farmers against government's announcement of Fair & Renumerative Price (FRP) of Rs 2150 per tonne of sugarcane. The protesters were demanding an increase in FRP.
Read the news item here (13th Nov, The Hindu)
- Sugar and Sugarcane are included in Essential Commodities and are covered under Essential Commodities Act, 1955.
- Sugar industry in India is highly regulated by government. The production, supply, sale and sugarcane as input for production of sugar, everything is regulated by govt.
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- Cyclicality Issues in Sugar Industry
- The above issues are magnified due to govt. regulations of SAP and levy sugar.
- India is the 2nd largest producer and largest consumer of sugar in the world.
- Sugar Industry in India is a Rs 80,000 cr big industry.
- Sugar Mills in India Sector% share of no. of mills in India% share of sugar productionPrivate Mills40%54%Public Mills6%3%Co-operative Mills54%43%
- Sugar industry contribution to rural economy - 50 million farmers and their dependants.
- Consumption pattern of Sugar in India:
- 62% consumed by Industries(biscuits, beverages etc);
- 25% low income households
- 13% high income households
(i) Sugar is price inelastic good,
(ii) Providing sugar through PDS is not a prudent policy]
- Sugar is produced primarily in 9 major states.
- Byproducts from Sugarcane
- Bagasse --> electricity through a process called Cogeneration, which is Clean Development Mechanism (CDM) approved to generate carbon credits
- Molasses --> Ethanol --> (1) Alcohol (2) E5 Blended Fuel
- Press Mud --> Fertilizers
- C Rangarajan Committee Report on Sugar Industry recently submitted its report to PMO. It inter alia suggested following major things:
- Retain FRP set by central govt. but scrap state level SAP.
- Farmers to initially get FRP at the time of sugarcane supply.
- On a halfyearly basis, concerned state govt. to announce Ex-Mill Price for sugar and its byproducts. Farmers would be entitled to 70% share in the value of sugar and byproducts based on proportion of sugarcane initially supplied. If this value < FRP initially paid, no money will be paid to farmer, else if its more then the difference will be paid to farmer.
- Removal of levy sugar obligation for sugar mills.
- Currently 10% of production from sugar mills goes for PDS operations of govt. of India. This sugar is purchased by govt. at a discounted rate. Rangarajan committee has suggested scrapping this policy.
- For PDS operations, concerned state govt. to procure sugar from Open Market purchases and central govt. to provide Rs 3000 cr subsidy to compensate state govt. for buying sugar at a higher price from market
- Scrapping of present mechanism of regulated release of non-levy sugar, as it imposes additional costs on factories on account of inventory accumulation.
- Command Area Regulation on Sugar mills be scrapped
- At present sugar mills are forced to procure sugarcane only from farmers in a particular command area of that sugar mill.
- Also, there should be minimum of 15kms distance between two sugar mills
- Both these policies was suggested by Rangarajan committee to be scrapped
- The committee has also recommended dispensing with the mandatory requirement of jute packaging for sugar (JPMA, 1987).
|All provisions which the Rangarajan Committee recommended to be scrapped are crossed out|
- I think Rangarajan Committee report should be implemented to address concerns of farmers as well as sugar millers.
- Sugarcane crop pest - Woolly Aphid pest attacks - There was a serious attack by this pest in sugarcane crops of Tamil Nadu and AP in 2003-04.