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Need for Sugarcane Market Outlook Exercises in India

BY: Dr. Shiv Kumar | Category: Agriculture | Submitted: 2014-06-25 12:06:46
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Article Summary: "The article highlights the importance of sugarcane and its by-products in changing paradigm of auto industry and bio-fuels in India. E85 engines in auto industry and requirements of varying levels of bio-fuels mixed with petrol will revive not only ailing sugar industry but also cut import bill of fuels. Sugarcane market outlook.."

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Authors: Shiv Kumar 1, Shiv Datt2 and Vikram Singh3
1 Principal Scientist, 2 Senior Scientist and 3Scientist IPTM Unit, ICAR, New Delhi

In an era when the Indian economy is undergoing a rapid transformation as a result of greater integration with the global economy, a balanced and comprehensive agricultural policy has an important role to play. A sound agricultural policy would facilitate efficient functioning of markets, improve food management systems, induce optimum input use and also provide a proper direction for targeting investments and efforts to accelerate agricultural growth and conserve natural resources. In this regard, there is an increasingly felt need for timely and reliable information on the likely demand, production, trade and prices of important agricultural commodities of the country. The availability of such information is of utmost importance in serving the welfare interests of producers and consumers and will also help the government to achieve the national macro objectives of inclusive growth, efficient food management and price stabilization.

Sugar has become a politically sensitive commodity. India is second largest producer of sugar and ethanol is a by-product of sugarcane. Discontentment is brewing among sugarcane growers in the country due to inadequate payment of dues or pending sugarcane arrears. There are sporadic incidents that even some sugarcane growers associations attempted to lodge FIRs against the sugar mills for non-payment of arrears of sugarcane prices to the farmers.

To pull the sugar industry out of the slump, there is a ray of hope of revival of sugar industries by pushing ethanol blending in petrol and releasing arrears of cane growers have become priorities for the National Democratic Alliance (NDA) government. There is a need to match the demand of Engine technology in auto industry with varying levels of supply of ethanol blended fuels. This is a path breaking policy. Government of India is mulling over whether auto companies can import E85 engines, used in countries such as Brazil and Canada, into India. E85 engines use a mixture of 85% ethanol and 15% petrol. This would bring a paradigm shift in auto industry and bio-fuel energy sector in the country. This would not only cut India's fuel bill substantially but also boost the ailing sugar industry. To sustain the health of sugar industry, there is a need to trade off interests of sugarcane growers, factories owners, consumers etc besides developing indigenous capabilities to meet emerging needs.

Many developed countries have put in place efficient systems to undertake regular monitoring and projection of the future prospects of demand, supply and prices of agricultural commodities that serve as a basis for informed and rational decision-making. Though the government currently collects and disseminates data on prices and arrivals from the government-regulated markets, yet there has hardly been any attempt by any agency or institution to provide short- or medium-term outlook for supply, demand, prices and trade on regular and continuing basis. Such an exercise assumes greater importance in the context of increasing integration of global agri-food markets and erratic behavior of world prices of agricultural commodities. It is urged to ICAR to develop suitable sugarcane crop specific models which suit Indian conditions, integrating the four components of consumption, production, trade and prices under a simultaneous equation framework to generate the required information and to use them for simulations and sensitivity analysis. India needs to have an efficient system in place to undertake regular exercise on the future prospects of demand, supply and prices of agricultural commodities that serve as a basis for informed and rational decision-making.

Recent debate on the delay of wheat import decision by the Indian Government is a testimony of non-availability of timely and empirical commodity outlooks. Similar was the case when sugar export was banned leading to the accumulation of huge sugar stocks. There are a number of such examples where ad-hocism and absence of scientific rigour in the decision-making process due to inadequate and untimely availability of systematic information have led to undue delays in taking appropriate decisions by the government resulting in high cost to exchequer and considerable political debate.

Now publication of Indian scientists from 1National Centre for Agricultural Economics and Policy Research (NCAP), ICAR, New Delhi-110012, have accomplished the task of development of Decision Support System for agricultural commodity market outlook with the support of National Agricultural Innovation Project (NAIP)- world bank funded scheme. Scientific institution in ICAR has been able to establish not only a mechanisms for regularly collating, analyzing and disseminating domestic and global market information for making informed decisions but also developed well defined and tested methodologies and models for outlook on supply, demand, prices and trade in the short- and medium-term. The research and education wing of Department of Agricultural Education and research (DARE), ICAR in Ministry of Agriculture and Food has developed capacity to undertake quantitative analysis for agriculture and commodity outlook. The talent of scientific team at NCAP in the form of knowledge, skills, experience and judgment on market outlook exercises should be tapped and nurtured. The clarion call of today is to institutionalize the same for undertaking commodity outlook exercises on a regular basis at a national and regional level especially in sugarcane. Future prices emanating from outlook modeling of sugarcane and its bio-products would help the stakeholders in setting prices of commodities in their future contracts in futures trade business. This would necessitate conduct outlook exercises of agricultural commodities in general and sugarcane and its derivatives in particular to generate the future scenarios. The future scenarios will generate lot of information for policy makers. This would help the policy makers in taking informed decision in international negotiation. The price path of future scenarios of outlook models will provide price information as input to set up prices in future contracts in future trading of agri-commodities. Hence such market outlook exercise will boost futures trade of agri-commodities in the long run.

1. Kumar, A., Kumar, Shiv; Shinoj, P., and Jain, Jajn (2011). Developing a Decision Support System for Agricultural Commodities Market Outlook. National Centre for Agricultural Economics and Policy Research (NCAP), New Delhi :1-40.

About Author / Additional Info:
Working as Principal Scientist on IPRs and agricultural Policy in ICAR

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