What Does It Take to Stabilise India’s Sugar Market?

India’s domestic sugar market is in the doldrums as the price of sugar in the international market has been falling. With the general elections coming up next year, managing sugar markets and balancing the interests of sugar millers as well as the sugar cane producers is a serious policy challenge before the Government of India (GOI). Higher sugar cane production in 2017–18 crop year makes the problem more complex. As with other “political commodities,” such as onion in the past, the fate of the current government may depend on how it handles this policy issue, particularly in the context of increasing instances of sugar cane farmers committing suicide. According to one of the media outlets (Firstpost 2018), in Uttar Pradesh till 18 May 2018,`13,367 crore remained unpaid to the sugar cane farmers. The government has declared a number of resolutions to help sugar mills as well as the cane producers. They are in two broad categories: (i) increasing exports, and (ii) finding alternative markets. However, both these options are complex, as increasing sugar export is not easy when the world sugar prices are sluggish. Diverting significant portion of the current sugar stocks to renewable fuel, mainly ethanol production, also has its own challenges with government restrictions on food-based feedstock use on energy production.

In addition, with stable or slightly declining per capita sugar consumption globally and competition from other technologically advanced major sugar producing countries, including Brazil and Thailand, the Indian sugar exporters would face formidable challenges in the world sugar market. While growing sugar cane as a commercial crop venture could be one of the effective tools for doubling farmer income, bold policy alternatives are needed to make it a reality. In this context, this article sheds some light on the consequences of the removal of restriction on direct sugar use as feedstock for ethanol production on the overall domestic sugar demand.