Households likely to get sweet deal on sugar prices soon

Soon, domestic consumers may be able to purchase sugar at a lower price than soft-drink manufacturers, bakeries, sweet shops and confectioners that together consume over 75% of the sweetener.

To ensure remunerative pricing for sugarcane farmers and a breather for sugar barons who hold sway in state politics, the Maharashtra government is looking at options like dual sugar pricing for domestic and industrial consumers.

When will a decision be taken?
The dual pricing will be on the agenda to be discussed in a conference in Pune on April 25 and 26. It will be attended by political bigwigs and representatives of the powerful sugar lobby, and sector experts to brainstorm ways to relieve the sector of its challenges, which is at the receiving end of market vagaries, supply glut, and its own inefficiencies. Cooperation minister Chandrakant Patil said NCP chief Sharad Pawar, union minister Nitin Gadkari and chief minister Devendra Fadnavis will attend the seminar. "We will be looking at long-term solutions," Patil said. Moreover, on April 2, Fadnavis is expected to discuss the crisis with prime minister Narendra Modi.

What are possible solutions to bail out sugar industry?
Patil said remedies could include: dual pricing, adopting the C Rangarajan committee formula of paying 70% of sugar prices to farmers, allowing factories to produce ethanol directly, linking sugarcane rates to sugar prices, and adopting newer technologies like liquid sugar. Later, an all-party delegation will head to Delhi with a memorandum.
"Though sugar prices have fallen, this is not reflected in rates of chocolates and cold drinks. This means that the fall in prices has benefitted them," noted Patil.

What are the obstacles in the course?
Sugar industry sources, however, said implementing differential pricing systems was tough.
While mills sell sugar around Rs2,050 per quintal (without excise), the fair and remunerative price (FRP) to be paid to cultivators is Rs2,200 per tonne for 9.5% recovery (percentage of sugar processed from a tonne of cane), plus Rs231 for every additional 1% recovery, said Shiv Sena MLA Chandradeep Narke from Kolhapur, who controls the Kumbhi Kasari sugar factory.
Falling prices and oversupply have led to just 46 of 178 private and cooperative sugar mills being able to pay the FRP to farmers.
With the water sugarcane crop guzzles, those who cultivate other crops are irked. Furthermore, the sugar industry has been getting repeated sops from the government, including a Rs2,100 crore package last year.
Patil said this year, they may have to pay around Rs2,700 crore to bail out the industry. This has also led to demands for similar bailouts from farmers who grow cotton and soyabean.

What other relief measures are being taken?
Meanwhile, in the state legislative assembly on Tuesday, the government announced measures to provide relief to the sugar sector. Export of molasses to other states and countries will be permitted, bills of cogeneration units supplying power to the state electricity distribution utility will be cleared immediately with an assurance that they are paid within 40 days of being raised. However, legislators across party lines demanded similar aid for other crops.

Fadnavis said the Centre would be requested to maintain a 50 LMT as buffer stock (to push up market prices), and added that in case these measures did not help pay the FRP to farmers, the state would provide aid after discussions with the Centre.

With the share of states to the buffer stock being decided by the contribution to sugar production, Maharashtra's share may be about one-third. Patil said the global supply glut was also because of Brazil's shifting to production of sugar from ethanol due to falling oil prices.

This year, Maharashtra is expected to produce over 90 lakh metric tonne (LMT) sugar in the current season, up from 77 LMT last year. Sugar production in India may cross 270 LMT versus 243 LMT in the previous season.