Sometimes the government is advised to break from the past and not try to interfere in the determination of sugarcane price at all. The controversy over the issue, however, has cost the country and consumers dearly. Sugar output is on the decline and prices of sugar are increasing.
Sugar mills and farmers in Sindh again locked horns this season and the conflict over the price of sugarcane lingered for many weeks during the early part of the crushing season.
Some of the sugarcane of upper Sindh was lifted by sugar mills in lower Punjab, while smaller sugarcane growers shifted to the manufacturing of gur at their own premises.
The controversial issue of price fixing seems to have been finally resolved by developing a consensus over minimum sugarcane price at Rs 58 per 40 kg. While this is a welcome development, negative consequences of the delayed compromise would be felt for a long time.
Decline in domestic production would be quite substantial and the government would be forced to import a large quantity of sugar. Although it is too early to make a reliable forecast, sugar industry sources believe that production in the country is expected to decline to between 2.8 and 3.0 million tonnes as against the actual sugar consumption of around 3.8 million tonnes.
Huge imports of sugar would further worsen the trade deficit of the country and consume large amounts of foreign exchange reserves. Due to continued tension between the mill owners and farmers and declining returns on cane, the agriculturists are also switching to other crops like cotton and wheat.
Of course, the worst hit would be the consumers who have to pay higher prices for purchasing their sugar requirements. Already, the prices of sugar in the domestic market are at a record high level.
Although the controversy over sugarcane price has been resolved in Sindh for the time being, the experience suggests that a compromise of this kind is usually temporary. The conflict could flare up again any time. It is also to be noted that Sindh is not the only province to experience such a sad situation.
The crisis occurs almost in every province after regular intervals. The row between sugar manufacturers and cane growers over sugarcane price often results in the suspension or slowdown of crushing activities at the mills, which adversely affects their financial position as well as total output in the country.
Keeping all the factors in view, it is fairly obvious that the sugar policy of the government needs to be revised in order to revamp this vital sector. It is quite clear that either the government has to play the part of an impartial judge between the sugar mills and cane growers and determine the sugarcane prices in a way which is judicious and acceptable to both the parties or extricate itself completely from the practice of price fixing mechanism and let the market forces determine the price behaviour.
Both these options have their pros and cons but the continuing tussle is doing a lot of damage to the sugar industry and must be avoided as far as possible. Uncertainty in policies, unnecessary exploitation of consumers and delay or refusal in the payment of a fair price to growers are also some of the concerns which need to be addressed.