Pressure on Centre to import sugar

NEW DELHI: Sugar politics has taken on a serious complexion within the UPA in tandem with rising prices, unleashing a complex blamegame. Intense pressure has mounted within the ruling Congress over urgently reining in soaring sugar prices after the commodity shot up to an unprecedented level of Rs 44-45/kg this week and there were clear indications that it would move up further to Rs 50/kg within a few weeks.

Congress leaders from the key sugar producing state, Maharashtra, rushed to the Capital on Thursday to pressure the government to import 25 lakhtonnes of white or ready-to-eat sugar consecutively for the next three years so that the country can maintain a three-month stock at all times during the period, while incentivising high sugarcane production meantime.

“This is shocking. We should have started importing sugar by January-February last year after estimates showed an acute production shortfall for 2008-09 and then for 2009-10. If the government does not do something to counter this urgently, it could be accused of either extreme apathy to the plight of consumers or even wilful collusion in allowing prices to rise unfettered,” an AICC member said.

Given that, state leaders have urged the UPA government to give private traders the go-by (despite import duty being reduced to zero, very peripheral quantity of white sugar has been imported thus far, thanks primarily to very high international prices) and import white sugar directly. Apprehensions are that the Opposition could use the unrelenting hike in the price of essential commodities such as sugar to charge the government with outright collusion with industry to let consumer prices rise.

In early November last year, senior MPCC leader Kanhaiyalal Gidwani had written to all top leaders of both the Congress party and the government warning that sugar retail price would hit Rs 50/kg by early this year. “To control this escalation in price, the government must import 25 lakh tonnes of refined sugar two months before the commencement of the 2010 sugar season (October-September) and another 25 lakh tonnes should be imported before the 2010-11 crushing season. This quantity should be available in India and with the stocks of the Central government prior to the commencement of the year’s crushing season,” he said.

However, for the government itself to import refined sugar at this crucial juncture could be fraught with both political and economic overtones, especially given the already mounting undertones of charges and counter-charges within the UPA over who’s to blame for the inexcusable situation. International sugar market prices continued to shoot up in the last week of December with London Daily Price white sugar for March 2010 closing at a high $694 per tonne, up sharply by almost $16 from the previous weeks closing quotation. New York No.11 for raw sugar for January 2010 closed with a gain of $16.32 at $597.01 per tonne.

Given the recent sugarcane farmers’ agitation, importing almost five million tonnes of white sugar is not expected to go down well with the sugarcane farmer electorate countrywide. “This is a sensi- tive issue and could ricochet politically on the government,” a Congress leader acknowledged. Apprehensions are also that this could result in disincentive to sugarcane farmers to plant more in the next sugar season.

On his part, food minister Sharad Pawar chose to deflect tacit charges of collusion with the sugar industry in boosting up prices by blaming commerce minister Anand Sharma and other key Congress ministers in the EGoM for the decision to create situations where — international sugar prices shot up on the back of India’s desperation to buy the commodity, and the decision to import or even continue exports long after acute domestic sugarcane shortfall was widely known.

That, clearly, has not gone down well with the Congress leadership. Speaking recently in his homestate, Pawar even preened that sugar prices would remain high for another two years atleast, something that would definitely have warmed the cockles of his political fiefdom in the thick of sugarcane country.

Sector watchers have time and again warned that the food minister’s eagerness to publicly announce shortage and over production in commodities has a direct impact on domestic and international market prices, as in the case of wheat imports earlier, since India is a top consumer.

Mr Pawar’s ministry, however, has chosen to project the situation as a highly advantageous one to domestic cane farmers, especially after traders stopped high priced imports for the last one and half months since the landed price had become more expensive than domestic production rates. "Mills are now willing to offer around Rs 250/qtl for cane compared to an F&RP of only Rs 130/qtl," one official held. That sugarcane is a cyclical crop and this situation could change diametrically in two years is unlikely to have escaped the government or cane farmers.

As worrisome to the ruling party are the political gains on sugarcane being garnered by UP CM Ms Mayawati. Mr Pawar shot off a letter to her last week, charging her with motivatedly preventing imports to be lifted by the state’s traders from ports and escalating consumer prices. But that may not wash with many who see him playing the same faux "pro-sugarcane farmer" card as her for political gains. The top sugar producer state has firmly kept out imported raw sugar, ostensibly to prevent a prolonged law and order situation from cane farmers who the BSP government purports to be helping by forcing sugar mills to pay a "high" cane price to them.

The move, crucially, has forced the state’s electorate to pay a higher than most retail price for sugar and fattened the coffers of the state’s sugar mills besides boosting the outlook of sugar companies listed on the stock market. "Sharad Pawar is dealing the same cards at the Centre that Mayawati is dealing at the state. The real losers are the farmers and the consumers," said a Samajwadi Party leader.

source: ET