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By:

Rajendra Joshi

3 December 2024 at 9:20:26 am

Sugar industry strains as traders reap profits

Gap between ex-mill prices, retail rates raised questions Kolhapur: The Indian sugar industry is caught in a deepening crisis, with sugar mills struggling to secure remunerative prices for their produce even as traders and middlemen appear to be making substantial profits. While sugar mills are receiving between Rs 4,600 and Rs 4,800 per quintal through recent sale tenders, retail prices have remained as high as Rs 58 per kg. The widening gap between ex-mill prices and retail rates has...

Sugar industry strains as traders reap profits

Gap between ex-mill prices, retail rates raised questions Kolhapur: The Indian sugar industry is caught in a deepening crisis, with sugar mills struggling to secure remunerative prices for their produce even as traders and middlemen appear to be making substantial profits. While sugar mills are receiving between Rs 4,600 and Rs 4,800 per quintal through recent sale tenders, retail prices have remained as high as Rs 58 per kg. The widening gap between ex-mill prices and retail rates has raised serious questions about the role of intermediaries and the effectiveness of the Centre’s efforts to contain sugar prices. The margins available to traders and intermediaries have reportedly crossed 20 per cent, leaving sugar millers perplexed. At a time when both sugarcane growers and mill operators are under financial pressure, the trading chain appears to be benefiting disproportionately. The Centre must examine this growing disparity and take corrective measures to prevent speculative profiteering. Retail sugar prices began rising sharply in August, touching nearly Rs 70 per kg in some markets. The escalation added to inflationary pressures and caused concern among consumers, particularly ahead of the festive season. In response, the Centre introduced a series of measures to improve domestic availability and moderate prices. These included permitting duty-free sugar imports, initially until October 31, a deadline subsequently extended to December 31. The government also directed sugar mills to commence the crushing season from October 15 and tightened monitoring of sugar stocks. In another significant intervention, it modified the ethanol policy, restricting the diversion of sugarcane juice, sugar syrup and B-heavy molasses for ethanol production. Following these measures, sugar mills began witnessing a decline in the prices offered through their sale tenders. Recent transactions have fetched between Rs 4,600 and Rs 4,800 per quintal. Going by the conventional relationship between ex-mill prices and retail rates, sugar should ideally have been available to consumers at less than ₹50 per kg. However, retail prices continue to hover around Rs 58 per kg, pointing to a substantial disconnect between the mill gate and the consumer market. Traditionally, sugar retailing operated on relatively thin margins. Since sugar is an essential commodity, retailers often treated it as a low-margin product to attract customers who would subsequently purchase other household provisions. The margin was sometimes informally equated with the resale value of the empty 50-kg jute bags in which sugar was supplied. This was considered a nominal return for retailers. That traditional pricing mechanism, however, appears to have undergone a significant change. The widening gap between mill-level tender prices and retail rates has created considerable scope for intermediaries to extract higher margins. The critical question is whether the additional amount paid by consumers is reaching the sugar mills or remaining within the trading chain. The issue assumes particular significance in Maharashtra, where the sugarcane pricing dispute has intensified ahead of the new crushing season. Farmers’ organisations have been demanding a minimum price of Rs 5,500 per tonne for sugarcane. Millers, meanwhile, are preparing to agitate for a revision in the Fair and Remunerative Price (FRP) framework and the restoration of a more supportive ethanol policy. The Swabhimani Shetkari Sanghatana, led by Raju Shetti, has taken a firm position that sugar mills should not be allowed to commence operations until farmers receive an acceptable price for their cane. Shetti has also drawn the state government’s attention to the unusually high retail prices of sugar, questioning why consumers continue to pay more even as mills are forced to sell at relatively lower rates. The Centre’s sudden changes to the ethanol policy have further complicated the industry’s financial position. Ethanol production had emerged as an important revenue stream for sugar mills, enabling them to diversify operations, improve cash flows and enhance their capacity to pay farmers. Restrictions on the diversion of sugarcane-based raw materials have weakened this support at a critical juncture. The resulting contradiction is difficult to ignore: farmers are demanding better cane prices, millers are struggling with shrinking realisations and policy uncertainty, while intermediaries appear to be benefiting from the gap between wholesale and retail prices. The government cannot address the sugar crisis merely by regulating mill stocks, imports and ethanol diversion. It must also examine the entire supply chain, identify where the widening margins are accruing and ensure that the benefits of market interventions reach both sugarcane growers and consumers. With nearly Rs 2 lakh crore riding on the sugar economy, allowing intermediaries to thrive while the industry’s primary stakeholders struggle would be a serious policy failure.

A Cabinet for the Future

Correspondent
Mar 6, 2025
3 min read

Updated: Mar 7, 2025

Nitish Kumar
Bihar

Nitish Kumar, the perennial helmsman of Bihar, has made what is likely his last reshuffle before the 2025 assembly elections. The move, which saw the Bharatiya Janata Party (BJP) gobble up all seven new ministerial berths, signals not just the shifting dynamics within the ruling coalition but also the looming reality of Kumar’s diminishing control. While the JD(U), remains a crucial ally in the state’s governance, the BJP has begun asserting itself with an eye to the post-Nitish era.


Kumar’s style of governance has long been to hold the reins of administration firmly in his hands. His ministers have traditionally functioned as executors rather than independent decision-makers, with Kumar himself acting as both mentor and arbiter. Yet, his decision to fill the cabinet to its full capacity, uncharacteristic of his governance model, hints at a tactical move. With the BJP now holding 21 of the 36 ministerial posts, the reshuffle has bolstered its position within the coalition, making it clear that the party is no longer content to play second fiddle.


The appointments highlight BJP’s strategic play in Bihar. Six of the seven new ministers hail from Mithilanchal, where the party has invested heavily, including in the Makhana Board. Sanjay Saraogi’s elevation reinforces support for a separate Mithila state. Caste dynamics remain crucial as two upper-caste ministers secure BJP’s savarna base, while Nishad leader Vijay Kumar Mandal and Vaishya MLA Motilal Prasad expand outreach.


More telling are the promotions of Krishna Kumar Mantoo and Sunil Kumar, both OBCs. Mantoo, a Kurmi, led the ‘Kurmi Ekta Rally,’ echoing Nitish Kumar’s 1994 rise, signaling BJP’s bid to erode his base. Sunil Kumar, a Kushwaha, has been placed in Nalanda, Nitish’s stronghold - moves that hint at BJP’s long-term plan to sideline the JD(U) chief.


Despite forming 36 percent of the state’s population, the Extremely Backward Classes (EBCs) have only 19 percent representation in the cabinet. Meanwhile, the general category, constituting just over 15 percent of Bihar’s population, holds over 30 percent of the ministerial posts. This imbalance is politically significant. Kumar built his career on the support of the EBCs, Dalits, and non-Yadav OBCs as a counterweight to Lalu Prasad Yadav’s MY (Muslim-Yadav) axis. By deprioritising EBCs in this reshuffle, he risks eroding the very base that propelled him to power.


The BJP assembling its own social coalition, one that combines upper castes with select OBC groups, while leaving the EBCs increasingly unrepresented. This might explain why Kumar has not only expanded the cabinet but has also refrained from aggressively pushing back against BJP’s growing influence. He is caught in a bind, unable to dictate terms within the alliance, yet wary of a complete break that might leave him politically adrift.


Against this backdrop, another subplot is emerging. Kumar’s son, Nishant, has slowly begun making public appearances, granting interviews, and adopting a more politically articulate posture. Once a reclusive figure, Nishant’s growing visibility suggests that Kumar is, at last, preparing for a transition. But will JD(U) cadres, let alone the electorate, accept him as a successor?


The BJP’s moves suggest it is unwilling to wait for an answer. By elevating figures like Mantoo and Sunil Kumar, it is positioning alternative power centers within the Kurmi-Koeri coalition that has long been Kumar’s fiefdom. The BJP’s growing assertiveness suggests that it no longer views Kumar as indispensable. Meanwhile, its willingness to prop up OBC leaders outside JD(U)’s umbrella hints at a long-term strategy to emerge as the dominant force in Bihar politics.


Kumar, for his part, remains a wily tactician. But his room for maneuvering is shrinking. The BJP’s aggressive positioning, the reshaping of the state’s caste coalition and the emergence of potential rivals within his own support base suggest that the Bihar chief minister is facing the greatest challenge of his political career.

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