Shortage of sugarcane: Why?

Is it because of inadequate monsoons? We do know that Indian agriculture is compltely dependent on the vagaries of the rain god. 2006-9 saw the country’s worst drought in decades, affecting several states, and crippling agricultural output which includes sugarcane. Now, let us take the case of sugar. It is a water intensive crop and requires large investments. In India, sugar is mainly grown in Uttar Pradesh, Bihar and Maharashtra (which contributes nearly 1/3rd of the total production). Rainfall received in these regions has recorded a decline since 2005, which is continuing. In simple conomic terms, rising sugar prices implies that its demand is more than the available supply. One reason for this may be the agroclimatic
conditions which had been prevailing since 2003-4. Scanty rainfall implies that additional water has to be fed to the sugarcane crop. Which requires farmers to install generators in their farms to pump more water and hence the input cos increases significantly. This makes sugarcane a rich farmers crop, which only the privileged can afford to produce. This in one way accounts for the fall in production of sugarcane crop, and its consequent rise in price.

Ban Boomberang

But lack of rain was not the only factor behind the 2008 crisis. Botched up pricing policies also contributed to it. This is how it happened. In 2006, panicked by a shortfall of sugar in the markets at home, the government banned all export of the commodity. However, production in that year
turned out to be a surplus and this caused a sudden fall in price. It plummeted to nearly 40 per cent of the pre-2006 rates, forcing many farmers to burn their stocks and switching to new crops. In the following year, production rose slightly and market prices continued to slump. Finally, the export ban was lifted in 2007. But by that time the damage had been done. There has just not been enough sugar to go around since then. India, which once was a global sugar trader, is now a hungry importer. This has, in turn, had a huge impact on the international sugar market. India is the world’s largest sugar consumer. To counter its dwindling domestic supply, it is buying larger and larger volumes from the global market. This is playing havoc with international prices. For example, Brazil and Indonesia, two leading sugar suppliers, have nearly doubled the prices of their fare.
 

Bitter Battles

There is another interesting element to this story. It is the volatile relationship between the sugar mill owners as represented by the Indian Sugar Mill Association (ISMA) and the government of India (GoI). There is an on-going tussle between these two camps over control of sugar prices. ISMA has been constantly pushing for deregulation of prices. What does this really imply? Sugar and Sugarcane are essential commodities under the Essential Commodities Act 1955. By this act, the government has been following a policy of partial control and dual pricing for sugar. Under this policy, a certain percentage has to be distributed in the Public Distribution System (PDS) by a sugar mill, as compulsory levy, at a price fixed by government, in every sugar season, This was initially fixed at 40 per cent of total production and cut down to 30 per cent in 2000, to 15 per cent in 2001 and it currently stands at 10 per cent. The ISMA, however, wanted more, and has been demanding that even this clause should be done away with. The issue was put before the Tuteja Committee in 2004, set up to revitalise the industry. It recommended that the remaining 10 per cent levy on sugar mills should not be abolished. The angry mill owners are now, reportedly, fuelling the sugar crisis. The UP sugar mill lobby is stubbornly refusing to process tonnes of imported sugar, that are apparently lying heaped at the Kandla port, in Gujarat.