Need for speedy action for the short and long term challenges. Sugar is now an international commodity and therefore the Indian domestic crisis has many dimensions.

sugarcaneStarting from UP where we saw farmer’s agitations and even violence and direct action against some reputed mills, the crisis has now spread far and wide. Chief Ministers of Maharashtra and also the Karnataka CM had met the PM and the PM for his part has constituted a three ministers’ panel.

UP, the largest sugar producing state is leading the rest of the sugar belts, Maharashtra, Karnataka and Tamil Nadu. In Karnataka the sugar mills had gone to court. In Karnataka like in Maharashtra, mill owners are some of the prominent ministers in the current state cabinet! In Maharashtra the very top name is Sharad Pawar, the Union agri minister who knows the problem so well and he is entrusted by the Prime Minister to find a way.Let us hope the Union agri minister comes out with an amicable settlement.

The sugar mills approaching the High Court is one thing. It is another thing to get the sugar mills started in time  so that there is no loss to the sugarcane growers, the farmers as well as to the mills whose viability to pay the price fixed by the state, say, Karnataka at Rs.2500 per quintal.

There are so many issues involved. One is the various sugar control acts and regulations. The legality and its enforceability is one thing. It is totally another thing as to how to make the sugar industry viable. There are again various angles. The global scenario. The national scenario and the state level realities.

Karnataka mills, most of them especially in north Karnataka are owned by ministers, present and past and they have such a big political clout that they met the Chief Minister, Siddaramaiah, on the eve of his Delhi visit to attend the sugar states ministers and sort out the issues.

So, the mills, rather the mill owners refused point blank to pay Rs.2650 per quintal as the state government wanted. On the other hand, the sugarcane farmers also postponed their agitation demanding Rs.2500 per quintal which the mill owners refused as uneconomical. Former ministers, Umesh Katti and Murugesh Nirani are also mill owners, now BJP MLAs. So we can imagine the clout of the politicians over the complicated sugar issue!

So, the sides, the farmers and the mill owners have postponed their threats to close down the mills!

Vidya Murkumbi, the owners of Renuka Sugars offered to hand over the mill to the state to run it and pay the promised sugarcane prices!

Sugar at the moment turned bitter!                                                                                                                                                  

In Karnataka the farmers as well as the sugar mills are on a sort of strike.
This rather an irony. On the national level, the Union government, mired as it is in so many political survival issues, has no clue to solve the sugarcane farmers’ issue.
The UP sugarcane farmers are very powerful as a lobby and they can make and unmake governments.

Of course, various party-led governments are also in these states. Mr.Pawar has the lever at this point of time. He is a canny politician and he knows how the make the issue one to serve his immediate political ends. There is the central factor, the pricing formula evolved by the former RBI boss Rangarajan.

The Rangarajan formula is fair and it must be the starting point.
The price is a sharing formula of the gains got by both the mills and the prevailing price. The farmers stand to get a fair share after taking into consideration the prices for the sugar as well as the sugarcane by-products sale.

But then, there is the global sugar scenario. It is said there is a sugar surplus in the international market. So, this is the rub.

So what do you do when there is no market for sugar!

May be the Centre can come forward to bear the excess amount of payment made at the demand of the farmers over and above what is already agreed upon.
This means another package for sugarcane farmers, very much like the one announced over the earlier general elections like a crop loan waiver?
Yes, this is a very ticklish and sensitive question.

There is already a huge unpaid due to the sugarcane farmers. There is also the real sugar crisis over the lack of adequate market price. May be rising the sugar price in the market is one and partial solution. Consumers might resist any price rise. The government is also weary of the inflation creating so much negative image for the government.

But then, is there any populist advantage for the UPA government on the eve of the coming 2014 elections?

We are also suspecting that finally the Sharad Pawar formula might be a mix of many things. Partly a subsidy, sugarcane subsidy and partly slight rice in sugar in the market or some other, more drastic policy to export sugar at a highly discounted price. Also, we have to look at other options.

One option is to produce more ethanol from cane so that the mix of ethanol and petrol can also solve partially the petroleum supply block. Brazil had done it. But then Brazil now is also having a separate type of problem.

Brazil, right now, is said to be shrinking as an economy, investments fall, factories closed and there is a general pessimism there. So, what lessons we can draw from Brazil, the world’s largest sugar producing country. But given the current reality in Brazil which faces a sort of economic recession and also the government is about to sort out the causes for a slow down, there is not much hope for Indian policy makers as to what lessons they can draw from Brazilian sugar economy.

May be finally it will be a sort of state subsidy. If we can give so much food subsidy, why not for the sugar cane farmers?

Also, the state of Karnataka is now ruled by a Congress government, in TN we have the ADMK, not a friendly ally of the Congress while in the UP; there is the Samajwadi government which as on date is not hostile to the UPA. So, given the current confusion that pervades the Central government, it is anybody’s guess what sort of package that will be trashed out finally. May be willy-nilly, sugar companies will start crushing and banks can write down the excess payment on behalf of the guarantees given by the state governments.

May be state by state negotiations might yield results. Certainly, the Karnataka mill owners and farmers might gain early. UP, it is another test for the sheer will power of the state politicians to bring round the farmers around a conference table and resolve the issue at an early date.

Sugar is no more a sweeter in the market.

Let us hope an early settlement is reached soon.

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