SBP issued a press release on the sugarcane industry yesterday.
This has led to a question regarding the calculations in the media release.
“The market price of molasses is around Rs.7,000 per ton but the UP state government pays mills a no more than Rs.2000 per ton.” But the price you have quoted is the MSP, a price applicable only if the farmers fail to sell their produce in the running season and this is the amount government offers to them as a degree of relief. It is not true that the farmers are forced to sell at this price initially. Even when they fail to sell sugarcane in the running season, there is no force to sell it to the government. It is an offer, which they may take to reduce their losses or decline and suffer the full loss.
Besides, we would like you to furnish some links of credible reports that say that the Uttar Pradesh government is offering Rs 2,000 per tonne for molasses.
My initial response
This matter is rather complex as farmers receive a price for sugarcane, not for molasses. A key leader of SBP made calculations and worked out that the effective price being paid to farmers for the molasses component is well below Rs.2000 per ton.
The issues raised in our press release have been raised here:
“A sugar industry official said the compulsory sales to the liquor manufacturers would result in a distorted market, where price of molasses to liquor manufacturers is one-sixth or 16-17 per cent of open market price.”
and here: http://www.sugaronline.com/website_contents/view/1217071 “But with the state government favoring blatantly the liquor industry,”
The problem is that this is a highly detailed calculation, and all the facts are not available to the outsider (i.e. farmers). There are wheels within wheels in the sugar industry. It is hard to disentangle the mess.
All one can say is that there is no business for the government to be dabbling in administering prices, setting quotas, restricting trade, etc.
Rangarajan Report of 2010: Report of the Committee on the Regulation of Sugar Sector in India: The Way Forward
Parliamentary research blog’s report: http://www.prsindia.org/theprsblog/?tag=frp
Indian sugar policy: Government role in production expansion, and transition from importer to exporter [this report suggests that farmers are being given higher prices than international prices, to ensure high supply of sugar in India.]
Question in Parliament: http://www.indiansugar.com/PDFS/FRP%20FOR%20SUGARCANE-LS-1754.pdf
Quora question: Why are Indian sugar mills running under a loss? If there is surplus production, why don’t they export it?
Various Problems of Sugar Industry in India