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prime concern The bitter story of sugar surplus By Vibha Sharma Concessions to sugar mills have allowed cane growers to be placated with higher prices, but the problem has only been buried for now. While mills say they are in losses, farmers allege they are hiding profits.
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SUGAR, CANE The bitter story of sugar surplus By Vibha Sharma Concessions
to sugar mills have allowed cane growers to be placated with higher prices, but the problem has only been buried for now. While mills say they are in losses, farmers allege they are hiding profits.
In April 2013 the government removed its decades-old control over the sugar sector. Approving a Food Ministry proposal to free sugar mills from supplying subsidised sugar for the PDS — the ‘levy sugar’ — it also scrapped the release order mechanism through which sales were being controlled in the open market. The move was hailed by the Rs 1 lakh-crore industry as a win-win situation for everyone — mills, consumers and cane farmers. “De-controlling” the sector, bogged down by stringent and complex government measures, was among the suggestions mooted by the Rangarajan panel. Seven months later in November, farmers from major growing areas —Uttar Pradesh, Karnataka, Tamil Nadu and Maharashtra — were out the on roads, protesting over low cane prices and arrears. C. Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council, had also suggested a revenue-sharing formula to determine cane price, which was rejected by states. Sugar mills refused to begin crushing, citing mounting arrears and high State Advisory Price (SAP) as reasons. Though removal of the levy sugar obligation had increased their liquidity, scrapping of release order mechanism meant that sugar was responding to the market like other commodities. With huge stocks piling up due to good production over the past three years, the supply had exceeded demand. Led by the Indian Sugar Mills Association, mill owners in UP — the country’s second largest producer of sugar — wanted the government to discourage imports and facilitate exports. But their main demand was that Rangarajan’s revenue-sharing formula be implemented to rationalise cane pricing mechanism. In other words, the mills wanted cane prices fixed according to the market price of sugar. In UP, the deadlock between private mills and the state government ended after millers agreed to pay Rs 280 a quintal SAP in two tranches. Then on Friday, Agriculture Minister Sharad Pawar headed an informal Group of Ministers, which recommended a slew of incentives for the industry, including 12 per cent interest subsidy on Rs 7,200-crore loans that mills could avail of from banks for paying cane farmers. It recommended loan recasting for mills as per RBI norms, incentives for production of raw sugar of up to 4 million tonnes and setting up of buffer stock besides doubling ethanol-blending in petrol to 10 per cent. The panel, however, ruled out an immediate hike in sugar import duty. The industry welcomed the Centre’s initiatives to help the sugar industry. “It will help the industry clear arrears of farmers and also venture into production of new products to grab opportunities where available. But for a long-term solution, a revenue sharing formula should be implemented,” said ISMA Managing Director Abhinash Varma. Politics of sugar Sugar has long been a political commodity, even though issues differ in various states. But in UP, Maharashtra, Uttarakhand and Karnataka, the innocuous sweetener holds the key electoral success. In Maharashtra, politicians have been drawing sustenance from the cooperative network of sugar factories. And NCP leader Sharad Pawar is the undisputed leader of the cooperative sector. After the situation went out of hand in the state, a worried Congress Chief Minister Prithiviraj Chavan appealed to the Prime Minister for the Centre’s help. Pawar, who knows the situation the like back of his hand, was appointed to head the informal GoM and settle the turbulence. Being an election year, the Opposition too had mounted pressure. In UP, the Akhilesh Yadav government fixed an SAP of Rs 280 per quintal, which mill owners refused to pay citing losses due to low sugar rates and arrears. The state waived off entry tax, society commission and purchase tax and tried to buy peace. Being an election year, neighbouring Uttarakhand saw its own share of cane politics. The government fixed the cane price at Rs 285 a quintal, apparently under pressure from Union Minister Harish Rawat — a known detractor of Chief Minister Vijay Bahuguna. Even though the Congress government in Uttarakhand had set up various committees to arrive at the SAP, it chose to follow a simple formula — Rs 5 more than UP. States have their own SAP, which is higher than the Centre fixed rate called the Fair and Remunerative Price (FRP). Mill owners claim that prices are fixed to appease farmers, but farmers say mills dictate local politics and their will prevails. Industry crying foul According to Varma, sugar mills in UP have been incurring heavy losses due to the widening gap between cane prices and ex mill sugar prices. He says most private mills, including in Punjab and Haryana, are facing problems due to high SAP. “In the past two sugar seasons, UP mills have incurred losses of Rs 4,000 crore. The industry at the start of the new season had apprised the state government of its failing financial health. It was conveyed that the paying capacity of the mills was only Rs 225 per quintal and anything above that should be borne by the state. “But the government stuck to last year’s payment of Rs 280 per quintal, with some small concessions though to the sugar industry. But the taxes waived only add up to Rs 11 per quintal,” Varma says. The remedy he suggests is a scientific revenue sharing formula to determine the sugarcane prices, adding that the industry wants implementation of the Rangarajan Committee recommendation in such a manner that the price of cane is determined as a percentage of sugar price and the first stage by-products’ price realisation. “This could be either 70 per cent of the revenue realised from sugar, bagasse, molasses and press mud, or 75 per cent of the revenue realised from sugar (giving a uniform 5 per cent weightage to by-products),” he says. Farmers feal cheated Dharmender Malik of the BKU and Naresh Sirohi of the BJP farmers’ cell says the contribution of by-products such as ethanol and molasses in a mill’s overall earnings is much higher than the earnings from sugar, but this is not disclosed. “They claim losses but the reliability of their balance sheets is doubtful,” says Sudhir Panwar, president of the Kisan Jagriti Manch. “If mills are not making profits, why don’t they opt for some other business? The entire situation is managed to suit the industry. If sugar mills were not in a position to buy, they should have told the farmers not to grow cane,” Sirohi says. Sugar is a very big industry with a turnover of nearly Rs 1 lakh crore at the wholesale level and farmers’ representatives say the freeing up of levy quota translated into Rs 2,500-3,000 crore additional revenues for the industry annually at current prices. “Was that profit shared with farmers? Farmers’ input costs are going up every year. Clearly the government’s focus is industry, not farmers. Panwar says the UP Sugarcane Research Centre assessed Rs 23 per quintal increase in input costs over last year, advocating a hike in prices from Rs 228 per quintal to Rs 251 per quintal. “Increase in labour costs from Rs 141 per day in 2012 to Rs 250 per day in 2013 was not accounted for. If that is considered, then farmers this year spent Rs 297 to grow a quintal, but the government fixed the price at Rs 280- Rs 290,” he says. Consumers king The country is expected to see a surplus production of sugar for the fourth year in a row. The consumer, therefore, can afford to have a sweet tooth. ISMA says if surplus sugar is not managed properly and is dumped in the local market, it will further depress the market. “Sugar is already trading Rs 6-8 below the prices prevailing a year back, and any further drop would be catastrophic,” it says. While sugar prices crashed from Rs 3,300 to Rs 2,650 per tonne in 2012-13, Panwar warns if the cane prices are linked to sugar prices — as the industry wants — farmers may be forced to divert to other crops, and then the situation may change for consumers. Salvation in by-products According to Panwar, the solution lies in treating cane juice and by-products as a complete industry. The final produce can never decide the price of the raw material. Cane prices should be linked to the input costs, the farm leader says. “Farmers’ input costs will keep increasing. The problem can be solved if weightage of by-products — molasses, bagasse, ethanol and energy cogeneration — is considered to determine the cost,” he says. Industry also stands to gain tremendously from the ethanol blending programme. The GoM on Friday favoured increase in ethanol blending in petrol from the existing 5 per cent to 10 per cent. But Panwar says even at present mandatory levels of 5 per cent, a blending of only about 3 ml ethanol per litre (0.3 per cent) is actually happening. Sources say the ethanol blending programme has taken a backseat probably due to pressure from a powerful petroleum sector which earns better commissions from imports. And the government is not interested in increasing import duty on sugar possibly because of the soft drink lobby — among the largest consumers of sugar — as imports are cheaper. Despite the current flood of sugar, therefore, the future may still be unstable.
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last word
During
his defeat in the Chess World Championship title match last month, Viswanathan Anand regularly got into time trouble. At one point in Game 9, he spent 45 minutes analysing one single move — quite unfathomable. This happens to the greatest — a time comes when the mind isn’t as sharp, as relentless as before, the motivation isn’t quite what it was 20 years before. A time when you realise that it’s just a game, not more important than life. A time when younger geniuses arrive. At 23, Magnus Carlsen might feel that chess is the most important thing in the universe. He might feel that he’s the centre of the universe, the most important person in his own life, who must realise his own dreams. At double that age, Anand probably doesn’t feel the same. He’s at an age when people start to live their dreams through those they love. Anand turns 44 the coming Wednesday. After his defeat in his hometown, the former world champion has been finding solace in something other than immersing himself in preparations for a challenge to Carlsen. His solace is his 30-month-old son. Anand probably realises that his son is the most important entity in his life, more important than chess. For game’s sake What does Anand feel about chess right now? He said recently: “For the moment, I just want to enjoy chess without thinking of results; without thinking really.” That might change over the next few months. Anand might find greater motivation, even anger, to fight back and reclaim his crown next year. If he doesn’t, it wouldn’t matter much. Anand’s place in history as one of the greats is assured. His legacy as the man who revolutionised chess in India is undeniable. When he emerged, India was a second-rate chess nation. Now it’s a chess powerhouse. The change occurred in Anand’s lifetime, largely due to him. He was the world champion for the last six years. Experts rate him as the most versatile world champion in history, for he’s the only player to win the World Championship in tournament, match, and knockout formats, apart from rapid time controls. But even if he does find the motivation, Anand clearly doesn’t have much time. At 43, he was already the oldest world champion in half-a-century. Garry Kasparov, Anand’s nemesis and one of the greatest chess players ever, lost his title at age 37 and retired at 42. Among the top 60 players in the world, Anand is the third-oldest. Among the world’s top 100, only six were born before 1970. The top of the chess world is a very young world. Anand is ranked ninth in the world. Except No. 8 Boris Gelfand, all those ranked above Anand are younger than him. Former champion Vladimir Kramnik (38) has come back very strongly after a period of disaffection with the sport, and world No. 2 Levon Aronian (31) is a force, too. Then there are the younger players, Hikaru Nakamura (25), Fabiano Caruana (21) and Sergey Karjakin (23). To earn the right to challenge Carlsen, Anand would have to come through victorious in a battle with these younger, highly motivated players in the Candidate Matches. Can Anand do it? It’s difficult to answer that, though the easy answer is that he cannot. Anand was psychologically vulnerable against Carlsen. He later said he was surprised that Carlsen didn’t change his game at all for the final. Tough competitor Anand too didn’t change his style — he might now agree that he should have. Experts rate Anand’s opening preparations as his forte, along with speed. Thus, from a strong beginning, Anand easily forced drawn matches in the past, confident that he’d be able to excel in the tie-break or rapid games. This didn’t work against Carlsen because the Norwegian is extremely patient and hates draws. Grandmaster Nigel Short likens his style to that of Glenn McGrath in cricket —“unspectacular, but extraordinarily accurate and effective”. Carlsen didn’t give Anand easy draws; instead, he opted to play on and on, and Anand was under pressure to merely draw games. Carlsen won Games 5 and 6 with the most minute of advantages in endgame. Carlsen put unimaginable pressure on Anand. Anand cracked. But curiously, it was in that ninth game, which he eventually lost, that Anand displayed the old spark. He had lost two games by then, was trailing 3-5, and needed a win desperately. He threw caution to the winds and launched a powerful attack after a strong opening. However, in the end, he blundered. A horrific mistake, according to experts. When he saw what he’d done, for a full minute Anand surveyed the wreck of his hopes on the chessboard, and then resigned. After that he needed to win the last three games to force a tie-break — an impossibility. What now? Yet, that ninth game is something Anand might cling on to, to revive his hopes. He moved away from the set-pieces dictated by the computers and was inventive and attacking. The contest was enthralling — Short said Anand had “emerged from somnambulism”. Anand had the advantage before he blundered. Would Anand have committed that blunder if he’d not been under massive pressure and the score had been 4-4, and not 3-5, at that stage? And wouldn’t Anand have been better off attacking Carlsen right from the first game? Only Anand knows the answers to these questions. Experts say the end of Anand is here. That the Carlen Era has begun. Only Anand knows if he has the will to challenge the Norwegian.
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That isn’t the Anand we’ve known, for Anand was the king of speed. Anand was known for his blinding speed in making his moves. Now Anand is constantly running short of time. That’s true away from the chessboard, too.