The sugar industry is back in the news after a two-year lull, which saw prices crash owing to record production. A reverse trend has now set in. Prices are looking up and production is expected to be at a three-year low.
Indian Sugar Mills Association Director General SL Jain throws light on the issues facing the sector in an interview with Ajay Modi. Excerpts:
The long-awaited decontrol of the sugar industry seems to have taken a backseat again. Do you think this is the right time to remove these controls?
In the current economic scenario where all the sectors are liberalised, there is no logic for control.
The sugar industry should not be penalised by imposing a levy obligation and the government should buy sugar from the open market and sell it at a price it wants. Even release mechanism is not consistent with the economic trend since there is a lack of yardstick in allocating releases.
Sugar has been highly vulnerable to the government’s price control measures. Is the government concern on sugar prices justified?
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The market dynamics should be allowed to operate. Where is the reason for a hawk’s eye on sugar prices? It is an established fact that about 75 per cent of the domestic consumption is accounted by institutional buyers like soft drink producers and indigenous sweet producers.
And these are the people who gain when prices fall. A four-member family does not spend more than hundred rupees a month on sugar. When prices go up, there is an effort to bring it down but when prices fall, there is lack of concern.
The declaration of parallel sugarcane prices by state governments, which is usually higher than the statutory minimum price fixed by the central government, has been a huge issue for the industry. What is the way out?
There has been a series of litigation to sort out the issue of arbitrary pricing by states. We are hoping for an amicable solution.
Over the years, ad hoc sugarcane pricing has become a tool at the hands of politicians to meet political ends and they continue to ignore the economic factors. Sugarcane price should be linked to the realisation from sugar.
The 10 per cent blending of ethanol with petrol, scheduled to begin from October, is likely to miss the deadline. What are the reasons? Is the industry capable of supplying the required quantity?
The 5 per cent blending introduced nearly two years ago has not been fully implemented so far. We do not see much of a cooperation coming from the oil industry. Moreover, now a reverse trend has emerged in sugarcane production and ethanol availability will be an issue.
A huge expansion has taken place over the last three years in the sugar industry. What kind of investments you anticipate in the future?
The future is bullish for the sector. However, no significant investment is expected this year. Some investment should start coming next year onwards.