Industry wants cane price linked to sugar realisation

NEW DELHI: The sugar industry has demanded a new formula linking cane pricing and sugar realisation. The industry wants sugarcane price paid to farmers linked to realisation from selling sugar and cane by-products such as bagasse and molasses.

The demand comes as the government considers deregulating the industry. Food minister Sharad Pawar has said that his ministry would finalise proposals over the next 10 days for circulation to other ministries. “With large sugar production expected in the 2010-11 season, this is the best time to decontrol the sugar sector,” Indian Sugar Mills Association (ISMA) deputy director general M N Rao and National Federation of Co-operative Sugar Factories MD Vinay Kumar said in a joint statement on Wednesday.

The industry assured the government that price decontrol will not squeeze consumers. Nonetheless, it acknowledged in a note to the food ministry that the government would have to provide a “minimum” price insulation during years of low sugar realisation.

Both 2008-09 and 2009-10 are seen as years of low sugar output and in January-February this year, sugar retail prices shot up to a peak of Rs 50 a kg, although retail prices have come down relatively since then.

The joint policy advocacy group of the two bodies agreed that the Centre has to continue with the public distribution system to protect poorer consumers against high sugar price but wants it to purchase the commodity from the open market and end the current system of levy sugar supply by industry at depressed prices.

The industry supplies 20% of its output to the government at about Rs18 per kg, much below market prices. A proposal by the food ministry that levy sugar percentage be slashed to 16% is pending in anticipation of firm sugar production estimates for 2010-11.

The government at present needs around 2.7 million tonnes of sugar for its PDS obligations. Sugar output for an year needs to be around 27 million tonnes for the levy obligations of mills to be slashed to 10%. A 16% levy obligation would suggest a much lower sugar production level for the coming 2010-11 sugar year.

However, the ISMA has projected a production of a minimum 25 million tonnes. The food ministry is yet to upgrade its estimate of 23 million tonnes for the year.

International Sugar Organisation executive director Peter Baron told agencies on Wednesday that India, the world’s largest sugar consumer, will likely produce 26 million tonnes of sugar, raw value, in the crop year up to September 2011 and export 5 lakh tonnes of sugar in 2010-11. India last exported the sweetener in 2007-08.

Significantly, the industry note to the ministry focuses on marketing and sales decontrol but wants the government control on distance between sugar areas of mills in the face of consolidation that decontrol would spell.

source: ET