Last Updated : 08 April 2013 at 16:10 IST
The partial decontrol of sugar sector would lead to increased volumes in futures as buyers and sellers increasingly participate in hedging activities, said a very senior sugar sector official working with a premier sugar mill in India, who did not want to be identified.
Increased activities are expected because the release mechanism has been done away with providing added flexibility to sellers of sugar like sugar mills.
“The participation by buyers would call for participation by sellers as well in the market activities. This would bring about volumes and equillibrium into the sugar futures,” he said. “Of course, there would be initial hiccups, but eventually, hedging would work as a tool for the long term for players.” he noted.
Our own inquiries confirm this trend.
An NCDEX official said that with sugar decontrol, “each mill may require a trading facility” and “many new inquiries are coming in.” He did not want to be identified as he was not authorised to speak to the media.
The sugar sector official also confirmed that there was no lobbying going on to increase the import duty on sugar. He, however noted that sugar from Pakistan''s Punjab is way too cheaper than Indian sugar.
He also said that some refineries in South India finds it creates better business sense to import raw sugar and process the same to sell in India.
'Happy with partial decontrol'
When asked about his reaction to partial decontrol and if he was disappointed that it is just a partial decontrol that has occurred, a sugar sector official said:
“When it comes to politically sensitive issues like sugar sector decontrol, things would not workout in 'one go',” he said. “Anyone who would expect things to go beyond this would be living in a fool's paradise.” he noted.
“The move is a positive one...and has given us some fresh life” he stressed. “Sugar mills could now save as much as Rs.13 a kilogram as levy mechanism has been done away with,” he added with some relief.
You do the math: sugar mills used to dole out several 1000 tons a year under levy mechanism sustaining losses.
Sugar cane decontrol
The official said that introducing sugar cane decontrol is out of question at least for a couple of years. “See, sugar and sugar cane are politically sensitive issues. For instance, states like Uttar Pradesh live out of sugar cane cultivation. The government there cannot drastically alter anything. Politics is very important in mattes like these.” he pointed out.
“It would have a chance to manifest when coporatisation of farming happens in India”. He invited attention to the case of potato farmers in Punjab. “When they found that the demand for potatoes was going up year after year and their land was yielding almost same amount of potatoes per hectare, they understood their efficiency had to go up.” he said.
“Most of the farmers are illiterate. They are not educated and it would take time to win their trust. It is a slow and steady game that wins.” he pointed out.
Agrees Chengal Reddy, Secretarty General of Consortium of Indian Farmers Association, though he disagrees with the word 'corporatisation'.
Corporatisation?
“In India 90% of farmers are small-holders. They are illiterate, resource poor and lack investment capacity; they may not be able to take up any other vocation. In this context, corporatisation of agriculture akin to West cannot happen in India. But those farmers who are involved in the cultivation of the same commodity can form groups as it would be a lot easier to bring them together given that they share the same market.” he said.
The challenge before the sugar industry would be to ride the current wave and surf into the virgin shores even as they tow the farmers along with them.
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