Ethanol from sugarcane is not an option available to water-deficient India.
The sharp rise in sugar prices in India, now the world’s largest producer and consumer of the commodity and currently a net importer, is sending ripples round the world. Global sugar prices have reached a three-year high, driven by expectation of continuing Indian import requirements. A poor monsoon has added to the effect of lower sugarcane acreage.
India urgently needs to set its house in order, marked by regular cyclical change in sugar output and prices. These induce policy measures that end up reinforcing the cycle. Take the recent central government decision to up the minimum support price for sugarcane by a massive third. This will lay the foundation for a higher sugarcane crop and sugar output which will take care of the current shortage. But things won’t stop there. The measure will also create a sugar glut, fall in prices, massive arrears in mill payment to cane growers (mills’ cash flow being hit by low sugar prices). This will enrage farmers who will cut sugarcane acreage which will create a sugar shortfall which will prompt the government to sharply raise cane prices.
To get out of this it is necessary to absorb a few truths which are not widely recognised. First, sugarcane largely goes to produce white refined sugar, used extensively in soft drinks and alcohol. All these are not just non-essential but harmful to health. Second, sugarcane is a water guzzler. It takes twice to three times as much water to grow sugarcane as rice.
Third, India is already water-deficient and with weather uncertainties and glacial melt leading the country into a serious phase of water scarcity, it is necessary to go easy on cultivating crops that need lots of water. Fourth, with food prices currently running high and likely additional pressure on them through population growth (India’s is still one of the highest) the foremost necessity is to sharply hike cereal output.
To draw the obvious conclusion from the foregoing, it is necessary to get one red herring out of the way. Biofuels, ethanol in particular, have lately emerged as a potential saviour which can supposedly deliver us from the tyranny of global energy prices. But if a country is water-scarce and its food security position is precarious, then it has to save as much water as it can to grow cereals first. Ethanol from sugarcane is not an option available to water-deficient India.
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The obvious first policy imperative is to sharply downgrade the importance given to sugar and sugarcane. Sharp rise in sugar prices will make governments unpopular among the middle class but the reaction should be a public education campaign saying that sugar is bad for your health and now, when sugar prices have shot up, is a good time to sharply cut back also on mithai.
If sugar prices remain permanently high at their present levels then reaching enough sugar to below-poverty-line consumers through the public distribution system will get very difficult. But how much sugar BPL families actually get from ration shops is anybody’s guess. A good part of it leaks out to the open market, making the PDS allocation a source of corruption. To minimise the political damage caused by not officially offering sugar, the government can promise and offer more cereals. This ties up with notions of promoting food security.
If sugar and the cultivation of sugarcane are downgraded then the 50 million farmers who rely on it as an important source of income have to be found an alternative. Obviously, support to farmers for growing cereals has to become more important. The need is to ensure that farmers get a better price for their grain and middlemen less by drastically overhauling the controls on distribution. If this is done the cost to the consumer for his food will not go up by as much as the support price for cereals.
While all this is being done, the current unduly high weightage given to sugar in the price index will need to be lowered as the commodity will become less important. A windfall gain will be the boost to the fight against inflation.
In this scenario, where sugar will cease to matter less to policymakers, controls on the sugar industry will be gradually eased. This will allow the more efficient sugar mills to thrive at the expense of the rest. Among the winners will be those who will have invested in capabilities to generate more byproducts and electricity from bagass.
The real losers will be soft drinks and liquor companies and politicians who have their hands in the tills of cooperative sugar mills and inefficient private mills, mostly in north India, which have survived by drawing rings round everybody and depriving cane growers.