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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.

Pollution Versus Tariffs

Feb 4
4 min read

Gita Gopinath’s remark on pollution at Davos punctured India’s celebratory mood, exposing a far deadlier crisis than tariffs or trade wars.  

The recent World Economic Forum (WEF) at Davos was expected to ruffle the feathers of Indian politicians in the least. Most were making merry there, besides attracting ‘large’ investments into India. They have succeeded in that endeavour, as we were told.


Some were there with families and must have enjoyed the beauty of the world-famous Alps region while doing expensive shopping for which Switzerland is globally known. It is a gorgeous little country that welcomes lakhs of tourists each year for the natural beauty and man-maintained cleanliness.


So, little indulgence in extravagance here and there, with personal and public money, on such official jaunts, can be condoned by the jealous Indians.


In any case, the submissive, hapless and timid lot of the Indian voter will not mind much. Our voters are also large-hearted - they do not mind deaths through water pipelines, a minister’s arrogant behaviour on camera, their refusal to resign for acts that tantamount to criminality, their changing of parties overnight; the consistent fall of rupee, or the Pahalgam attack. So why, then, would they object to those enjoying themselves in Davos?


Inconvenient Truth

But let us keep this acerbity aside for a moment. At Davos, little did our ruling politicians realize that there was one Dr. Gita Gopinath, a scholarly financial brain, who knew India better than them. She appeared as a friend of India, having had origins in this land. Those in Davos also did not probably know she was contacted by a television journalist to talk about India’s untapped potential as a global business power. On a TV interview, seated next to a top industrialist and a smart Indian minister, she suddenly sounded patriotic. Of course, she was very serious during the entire interview and gave balanced, calculated responses when the greenhorn female anchor from Delhi asked the experienced panel different questions.


That the Indian-American economist, having studied at prestigious Princeton University, had served as the chief economist at the International Monetary Fund (IMF), added to her stature and significance to her remarks. In her mid-50s, Gopinath is a compelling speaker - soft-spoken, confident and erudite. She knows her subject intimately. Otherwise, after an accomplished stint at the IMF, she would scarcely have secured a teaching position at Harvard University. Fortunately, the United States does not operate under a UGC-type system.


Some people back home do make a mockery of the world-famous, 390-year-old university, but that is worth a pardonable indulgence. But how did the young, brilliant woman of global repute manage to ruffle the feathers of Indian politicians?


In truth, she made a small ‘mistake.’ She mixed business with pollution, and in doing so, inadvertently struck where it hurts the most.


Responding to a question from anchor Kalli Purie, Gopinath gently observed that India’s economic development is fraught with a serious risk of pollution - one she suggested was more pressing than the threat posed by American tariffs. “Indians should worry more about that,” she opined, firmly but without rancour.


That qualified statement from a global expert, non-aligned to any Indian political outfit in India, spoilt the Davos party suddenly.


Heretical Experts

Of course, we have our own Dr. Sunita Narain, the environmentalist who spent almost her full adult life fighting pollution and alerting governments about environmental damages. Some governments heard her; others chose to ignore. Her powerful voice got weakened over the past decade, though her crusade continues.


But Gopinath speaking about Indian pollution? That was the least expected ‘investment proposal’ from Davos. No state had inked a deal with her yet it sounded like an atom bomb. 


Did she say anything wrong? Leave Delhi for a moment, almost all Indian cities are facing a bad air quality crisis for decades which is going from bad to worse. Entire north India is reeling under it with the Government appearing clueless.


I went to Kolkata last week and saw no difference there; Bhopal, once a green capital, can see dust-layered trees which are barely able to breathe. The 2.5 PM is being inhaled by all and sundry. Indore, the cleanest city, is full of dust.


People are not dying of contaminated water alone, pollution is silently killing them, a fact Dr. Gopinath spelt out in a dignified manner.


Year after year, global lists indicate grave pollution of India but there are no concrete actions from the Government which appeared to be caught on the wrong foot when the globally acclaimed economist pointed to the problem with good intention. But some cretinous ‘bhakts’ began trolling her on social media. They accused her of changing the topic, which she did not actually do.


Its time India took the economic expert much more seriously to save thousands of lives that perish each year. Tourists have stopped coming to parts of India gradually, one hears.


Indians, especially the elderly ones and those engaged in the unorganized sector, are the most vulnerable. It is the government’s duty to care for them. After all, tariffs can be fought off tomorrow but not pollution!


(The writer is a senior journalist and author based in Bhopal. Views personal.)

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