Output mismatch may upset govt’s sugarcart

Believe it or not! The agriculture ministry’s first sugar output estimates in September and the latest figures have a mismatch of 40mt. The just-announced estimates see production in 2006-07 at 322.94mt against September estimates of 283.4mt.

Such gross discrepancies in estimates, experts feel, not only holds potential for deflating the sugar economy, but also threatens to impact the overall economy. Curiously enough, the substantial jump in estimates comes despite a persistent refrain by those in the industry and trade that the government’s first estimate(283.40 mt) was much lower than their own.

Little wonder, then, that agriculture minister Sharad Pawar found it necessary to comment on how sugarcane farming was dominating a good chunk of the arable land in the country and eating into land that could cultivate oilseeds and pulses, both of which are imported annually at a high price.

One reason why farmers chose to plant cane in such an overwhelming manner last season could be the gross returns per hectare for sugarcane, which is the highest among all key crops, at Rs 50,000 per ha this season. There’s a strong reason why sugarcane should worry Mr Pawar.

During 2006, according to an ICRA study, the progress of sugar cane acreage indicates a 3.9% (year-on-year) increase to 4.45 mha up to July 2006, with increase in acreage reported from all key states. To boot, it is an all-year crop, allowing little possibility of an inter-crop or rabi and kharif interchangeability.

In a recent write-up, Rajya Sabha MP and Shetkari Sangathana leader Sharad Joshi said, “The statistical averaging method used by the CACP results in some hilarious but very wrong computations. The costs attributed to labour, pesticides, manure, power and irrigation have been often quite bizarre. Recently, the minister of state for agriculture in Maharashtra admitted that the actual cost of production of sugarcane in the State was about Rs 300 a tonne higher than the SMP.”

Since the sugar industry, the second largest agro processing industry in the country, contributes an estimated Rs 17 billion annually to the national exchequer and treasuries of various states by way of excise duty and purchase tax on sugar cane, clearly, big mis-steps on estimates could also prove expensive for the government both politically and economically.

With the government now forking out funds for both maintenance of a two million tonne buffer and extending export subsidies after having imposed the prolonged export ban against the best advise of the industry, it is sharply evident just how much a skewed sugar economy without a rational and comprehensive policy can significantly impact the overall economy. Crucially, 2006 was the year when the sugar industry faced a historic period when its produce commanded a markedly higher price internationally than in the domestic market, thanks to a strong bullish sentiment globally.

The WTO award preventing dumping by the EU of subsidised sugar of five million tonnes in the world market annually, as also the decline in production in major producer countries such as Thailand and Australia due to bad weather helped the bullish sentiment. Add to that lower exports from top producer Brazil, thanks to higher ethanol doping domestically, and lower production by Pakistan, things could not have been better for sugar exporters here.