February 23, 2020

Sugar sector engages 35 mn farmers, employs 3.5 lakh people

Sugar sector engages 35 mn farmers, employs 3.5 lakh people: Pahle India Foundation Report.

Report makes 8 key policy reforms recommendations for sugar sector to end woes of farmers, millers and others engaged in it Sugar industry involves a total capital investment of Rs 1,250 crore but businesses in this sector have stopped being profitable for a long time due to excessive controls India’s sugar sector engages around 35 million farmers, and provides employment to around 3,50,000 people through mills and distribution networks, according to a report titled – ‘An Integrated Value Chain Approach to Ease of Doing Business: A Case Study of Sugar, Alco-Bev, and Tourism’ released by Pahle India Foundation, an FCRA certified policy think-tank.

This industry involves a total capital investment of Rs 1,250 crore but as a standalone industry, hasn’t been profitable for manufacturers and is “under immense stress” due to excessive regulations, the report points out.It adds: “Since regulations in the sugar industry extend across the value chain, right from area allocation, purchase price of sugarcane, quantity of sugarcane purchased, quantity of sugar released, and the selling price of sugar, industry players have little or no flexibility to take business decisions.”

Talking anout the extent of regulations, Mr. Abinash Verma, Director General, Indian Sugar Mills Association (ISMA), said:  “The Indian sugar sector has been very closely controlled by the government for the last 7 decades and therefore there are some laws which are very old and have lost their relevance. Therefore, the laws which where there 30-40 years back need to re-visited, reviewed and removed so that Indian sugar becomes competitive internationally.” 

India is both the largest producer of sugarcane as well as the largest consumer of sugar. India is also one of the largest exporters of sugar to the world. Yet, in the year 2018 alone, two bailout packages roughly totalling Rs 120 billion was announced for this sector. Among other concerns for sugar sector highlighted in the report include lack of alignment between purchase price of sugarcane and selling price of sugar, high cost of inventory, and limited recovery.

The report also makes important recommendations for sugar industry reforms, and says that these reforms should begin at the farm level. It moots re-examination of all the controls to make the sector profitable once again. Among other key recommendations for policy reforms made are creating a separate pricing mechanism for retail consumption and commercial consumption having a comprehensive trade policy with better methodology for demand estimation to minimise pricing distortions, compulsory registration of farmers with millers and decontrolling movement of sugar by-products.

Sugar was part of the three sectors, besides alcohol-beverages and tourism, chosen for the study report which aimed to establish that an integrated value chain approach to ease of doing business will lead to more quantifiable gains and better results for the states. 

As an integrated value chain, the sugar industry acts as an input industry for the alcoholic beverages sector, and the tourism industry is the output sector.The report establishes that how small reforms in these sectors can create cumulative economic impact across the value chain and for the state.

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