Production is expected to decline by 16 per cent this year

The drought this year is likely to result in the sugarcane output declining by 16 per cent in the 2012-13 sugarcane crushing year (October-September), according to the Karnataka chapter of the South Indian Sugar Mills Association (SISMA). Niraj Shirgaokar, President, SISMA, said cane output is likely to fall to 280 lakh tonnes in 2012-13, from 335 lakh tonnes in 2011-12. Mr. Shirgaokar said drought conditions in three major sugarcane producing States — Maharashtra, Gujarat and Karnataka — is also likely to result in sugar prices remaining firm during the next year. Although Uttar Pradesh is expected to overtake Maharashtra as the top producing State in the current year, it would still not be enough to arrest the decline caused by widespread drought, Mr. Shirgaokar told The Hindu .

The association estimates that area under cane in Karnataka has fallen from 4.5 lakh ha last year to 4.1 ha in the current cane-growing season. “Not only are yields likely to fall, but even the sugar content in the cane is likely to dip,” Mr. Shirgaokar said. He said the widespread drought has affected the main sugarcane growing districts of Belgaum, Bagalkot, Bidar and Gulbarga in Karnataka. Output in the southern districts of Mysore, Mandya and Chamarajanagar, where a relatively smaller acreage is under sugarcane, are also likely to be hit badly this year.

In 2011-12, sugarcane was grown in 2.13 lakh hectares in Belgaum district, nearly half the acreage in the entire State. It is not surprising that 20 of the 59 sugar mills that are working are in this district. Sugar output in the State, which accounts for about 15 per cent of the national sugar output, is likely to decline by almost 25 per cent — from 38.1 lakh tonnes in 2011-12 to 29 lakh tonnes in the current year.

Revenue-sharing model

The SISMA is arguing for a shift to a revenue-sharing model that would index the price of cane that is paid to farmers to the realisation of revenues that the sugar mills make. “This would put an end to ad hocism that plagues cane pricing,” Mr. Shirgaokar argued. He said the Fair and Remunerative Price (FRP), which is announced by the government before the cane-crushing season commences in October, would still be valid as the “floor price” that farmers would get for the cane they sell to the sugar mills. Growers will also be entitled to a share of the profits that the mills make through the sale or production of bagasse, ethanol and molasses, and power generated through cogeneration units attached to the sugar mills, Mr. Shirgaokar said.

On de-control

A committee, headed by the Prime Minister’s Economic Advisory Council Chairman C. Rangarajan, is examining the issues involved in decontrolling the sugar industry. The committee recently submitted its report to the PMO.

Asked if the revenue-sharing model would not expose farmers to the vicissitudes of the market, V. Venkata Reddy, vice-chairman, Bannari Amman Sugars Ltd. said, “Yes, there could be some variation in prices between what the farmers expect at the time of sowing and what price they actually get at the time of the harvest, but they would still get a fair and remunerative price.”

Compared to the FRP of Rs. 1,700 per tonne, the average mill in north Karnataka, where the cane yields 12 per cent sugar content, pays about Rs. 2,000 per tonne to farmers, Mr. Reddy said. “The farmer stands to gain Rs. 200 more per tonne if sugar control is abolished,” he said. He blamed sugar control for the longstanding compliant by farmers that many mills take a long time to pay for the cane they supply.

Clearly, the industry regards revenue sharing as a magic bullet to solve the problems it faces. Mr. Shirgaokar said Chief Minister Jagadish Shettar has assured the SISMA that he would constitute a committee to define the contours of such a scheme “within a week”. Although SISMA claims that farmers themselves would welcome such a move, it remains to be seen if they see it as being in their interest.

  • Drought in three major sugarcane producing States — Maharashtra, Gujarat, Karnataka

  • Industry demands revenue-sharing model