GIST of Editorial for UPSC Exams : 07 October 2020 The Centre and States are aggravating the sugar industry’s problems (The Hindu)

The Centre and States are aggravating the sugar industry’s problems (The Hindu)

Mains Paper 2:Governance 
Prelims level: Fair and Remunerative Price
Mains level: Development processes and the development industry

Context:

• The sugar industry, supposed to commence its crushing activities for the 2020-21 season this month, appears to be hamstrung by problems — some familiar and some new.
• In what has become a familiar story after every season of surplus, the industry has run up large arrears with farmers for the supply of cane. 

Key highlights of the report:

• A report in this paper said that sugar mills in Uttar Pradesh alone have run up arrears of over ₹8,447 crore for 2019-20 — twice the amount due in the previous year — for the cane that they had already procured and crushed last season.
• This year, because of the extended lockdown, millers’ cash flows have been hit by a sharp fall in the institutional offtake of sugar from food and beverage makers and hotels — usually a stable revenue source. 
• The industry’s persistent working capital crunch has also been aggravated by the Centre delaying its promised payouts towards transport subsidy on sugar exports, relying on which the industry has shipped out over 60 lakh tonnes of sugar this year. 
• The Centre has been tardy in reimbursing mills for the carrying costs on the 40-lakh tonne buffer-stock created at its behest. 
• State governments, on their part, have been delaying payments on co-generated power.

Key problems and measures needed:

• Rather than promptly cough up these dues, the Centre and governments of key sugar-producing States have persisted with populist policy measures that interfere in the active functioning of the market and aggravate the industry’s structural problems. 
• For instance, instead of desisting from hikes in the Fair and Remunerative Price (FRP) for cane, which would discourage farmers from planting excessive cane, the Centre has kept up FRP hikes and begun announcing a ‘minimum selling price’ for sugar. 
• States like Uttar Pradesh have worsened the over-capacity situation with unrealistic State Advised Prices and capital subsidy schemes. 
• The industry’s own efforts at de-risking the business through forward integration moves such as the processing of molasses into ethanol and bagasse into power have come a cropper, too. 
• Annual skirmishes between the sugar industry and oil marketing companies on the quantum and pricing of ethanol have ensured that the ethanol blending programme is a non-starter.
• With revenues from co-generated power dependent on the shaky finances of State discoms, this diversification gambit hasn’t worked either.

Way forward:

• The obvious solution to the sugar industry’s woes lies in freeing both cane and sugar prices from the shackles of government control and allowing free market forces to dictate the demand-supply equation for sugarcane and its end-products. 
• Many expert committees, including the C Rangarajan committee in 2012, have already put out well-thought-out policy prescriptions for untangling the mess that is the Indian sugar sector; the only thing required is the political will to implement these recommendations.

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Prelims Questions:

Q.1)With reference to the Shipping Corporation of India (SCI), consider the following statements:
1. SCI was established on 2 October 1961 by the amalgamation of Eastern Shipping Corporation and Western Shipping Corporation.
2. SCI was awarded the prestigious "Navratna" status by the Indian Government in 2008.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: C

Mains Questions:

Q.1) Give an outline of sugar industry problem in India. What are the steps taken by the government to address the issue of sugar industry?