Q&A: Vinay Kumar, MD, National Federation of Cooperative Sugar Factories

Last Updated: Thu, Dec 01, 2011 19:34 hrs

The recent disputes over cane pricing in the country’s biggest sugar producing state of Maharashtra question the pricing policy followed currently. Cooperative mills dominate production in the state. In an interview to Ajay Modi, the managing director of the National Federation of Cooperative Sugar Factories, Vinay Kumar, bats for linking cane to sugar prices to avoid such disputes in future. Edited excerpts:

Why is sugar and sugarcane always a politically sensitive issue, as was seen recently in Maharashtra?

The sugar industry is linked with both the farmer and the consumer. Considering its mass base and widespread effect in the rural economy with respect to employment and income generation, in some states this has become a political weapon.

What is the long-term solution to sugarcane pricing disputes?
In all sugar producing countries like Brazil, Australia, Thailand, etc, cane price is linked with sugar prices and around 70 per cent of realisation from sugar is shared with the farmers as cane price. However, many Indian states declare their own sugarcane prices, while sugar prices are controlled by the central government. There is a total mismatch.

The long-term solution for this perennial problem will be linking of sugarcane price with sugar prices, along with removal of all controls like release mechanism and levy.

The Rangarajan committee has been set up for this purpose and its report is awaited.

Is the industry still pushing for decontrol? What aspects of control is it seeking for removal?
The industry has always been very keen to see decontrol. In the first phase, the industry is seeking removal of levy obligation and discontinuation of release mechanism.

What quantity of sugar export was allowed last season? How much can be exported this season?
The government allowed 2.6 million tonnes (mt) of sugar for export (1.5 mt under open general licence and 1.1mt under advance licence scheme. The government has allowed 1 mt under OGL this season but it should allow 2-3 mt more.

The government is apprehensive that the retail price will rise if export is allowed. Is this concern justified?
If more export is allowed, the retail price of sugar should not increase, as the production estimated for this season is much more than the consumption.

In the period since the export of 2 mt was announced in four tranches, there was no increase in the retail price. It had been hovering around Rs 32-33 a kg.

What are the projections for the current season’s output? Will it be adequate to meet domestic consumption and export demand?
Sugar production during 2011-12 is expected to be around 26 mt and domestic consumption is estimated at 22 mt. We began the current season in October with a stock of four mt.

Therefore, even after export of three mt, we will have a stock of five mt when the new season begins next October.

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