India pays the bills while Sharad Pawar gets the votes.
As politicians go, there is no one better at leveraging public money to further his political constituency than Sharad Pawar. India pays the bills. Sharad Pawar gets the votes.
Consider two moves.
Earlier this week, the government agreed to bear the cross of an additional expenditure of Rs 3,000 crore to procure cotton from farmers, mainly in Maharashtra and Gujarat. The Minimum Support Price (MSP) is meant to shield farmers from the vagaries of market forces.
In September this year, the MSP for cotton was increased by 46 per cent. The prices of the popular Shanker 6 variety jumped from Rs 2,030 a quintal last year to Rs 2,850 a quintal this year.
International prices meanwhile halved from a high of 80 cents per pound of cotton six months ago to around 40 cents in December at the New York-based NYBOT Futures. Much of this drop was ascribed to the global economic crisis and global consumption is expected to fall marginally this year as well as the next.
Based on this, cotton mills cut down buying and the cotton ginning industry is screaming. India is the largest cotton grower after China, and became a net exporter of cotton after the introduction of Bt cotton. The crop has been so good this year that domestic output is expected to touch a record 33 million bales (one bale is equal to 170kg).
That’s a lot of cotton. And thanks to Pawar, the government has to buy most of it. But the people who vote are not the ginning or the textile industry: they are the farmers of western Maharashtra, who are laughing all the way to the bank and telling themselves that Pawar should become prime minister. Sure, the fiscal deficit goes up — but that’s the finance ministry’s problem.
Now consider sugar.
Files on unfettered permission to import sugar are moving at breakneck speed in Krishi Bhavan. The ministry has taken the cue from the Agriculture Minister’s statement at the Economic Editors’ conference earlier this month where he said that sugar output in the current season would fall short of projected consumption, which is expected to increase to 22.0 million tonnes from 21.5 million tonnes in the previous season. Sugarcane output has declined and there was a delay in the start of the crushing operation in Maharashtra and Uttar Pradesh, the minister told economic editors.
Pawar said availability of sugar in the domestic market would be adequate in the current season despite lower output estimates as the country is sitting on a huge carryover stocks of 11.0 million tonnes from the 2007-08 season. But, he added the reserves could decline to about 7.5-8.0 million tonnes at the end of this season.
If that is not a case for imports, what is?
This time, Pawar is not batting as much for the farmers as for sugar traders and processors. And the devil, as they say, is in the detail.
The Maharashtra cooperative sugar industry, a modern and efficient conglomerate of 190 mills comprising the large sugar farmers of western Maharashtra, is seeking permission to import on the tonne-to-tonne basis instead of the grain-to-grain basis. This means for every tonne of raw sugar that a mill imports, it will have to export a tonne of refined sugar over a certain period of time. Imports should be duty free, of course, a facility that was scrapped in April this year.
Instead of buying cane, these mills want to leverage the dropping value of the Brazilian real vis-à-vis the dollar and buy up Brazilian raw sugar which can be processed. India’s purchase will mean the Brazilian sugar economy will be saved.
On the other hand, sugar cane farmers in Tamil Nadu, not so well organised, have been agitating for higher cane prices. In UP too, there have been confrontations between mills which have postponed crushing and farmers demanding their cane be acquired by the mills, leading to interventions by the state government.
But in Maharashtra and Karnataka, the demand has been to import raw sugar. And take a guess which course Sharad Pawar favours? Import, of course. Which is why Pawar is losing no sleep over the appointment of Ashok Chavan as Chief Minister of Maharashtra.
True, the son of SB Chavan cannot be a friend of Pawar’s. But what the appointment has managed to do is keep Narayan Rane at bay. Relations between the Nationalist Congress Party (NCP) and Ashok Chavan will not be as cosy as they were with Vilasrao Deshmukh. Or as they would have been with Sushilkumar Shinde.
But then, with cotton farmers and sugar traders by his side, Pawar has no reason to worry about Maharashtra.
