Sugar supply needs technology and data-driven approach – Editorial by Uppal Shah
India needs more frequent and accurate sugar stock and production data to manage rising prices and avoid supply disruptions. Despite government measures against hoarding, ex-mill prices have risen sharply. A weekly regional stock-and-offtake report, combined with technology-based production forecasting, could enable timely policy decisions on sugar supplies, ethanol diversion and imports.
The Government is ensuring that there is sufficient sugar available in the market and that the prices are reasonable and doesn’t pinch the consumers. This week, Government directed that no sugar mill shall retain sugar stock in its premises for more than seven days after sale to any dealer, agent or bulk consumer, except in circumstances beyond its control.
Sugar stock holding limit was also imposed on dealers, to check hoarding and undue speculations.
But inspite of the measures taken by the Government, the ex-mill sugar price in Maharashtra is trading at Rs 4900-5000 per quintal, while in Uttar Pradesh Rs 5200-5300 per quintal. The sharp increase is also evident when compared with June, when sugar prices were around Rs 3,800 per quintal. At around Rs 5,000 per quintal, this represents a price increase of around 30 per cent.
The next few months until October seem crucial to manage internal domestic consumption and keep a check on the prices. After that sugar mills will start their crushing operations and new-season sugar will enter the market, improving the supply and price situations. In fact if due to labour shortage or weather issues, if the crushing doesn’t start by mid-October, the Government can also resort to importing raw sugar at zero duty. This will improve the domestic supplies.
I feel there should be few important steps that are needed to improve the current situation.
Information is the key.
The government should communicate a consolidated weekly assessment of sugar stocks held by mills. At such a juncture of immense market volatility, monthly stock information is not sufficient.
A weekly stock position would give policymakers a much clearer picture of the sugar quantity physically available, the pace at which stocks are being released and the regional distribution of supplies.
Such a system should capture sugar availability with mills and domestic offtake. A regional break-up would be valuable as a comfortable national stock position might not give a clear picture of local vagaries or logistical bottlenecks.
Another most important requirement is a more accurate production assessment at the beginning of every sugar season.
Even an astute policymaking is ineffective if data betrays it. Likewise, India cannot formulate a sensible and strategic sugar policy if the sugar production estimate is erroneous and substantially different from the actual output.
Production projections determine decisions on domestic supply, ethanol diversion, exports etc. An inaccurate estimate can therefore set off a chain of policy course corrections later in the season, which is detrimental to the industry and the country.
It is hence important that industry, government and other stakeholders take refuge to technology. The government and the industry should establish an accurate system of periodic production forecasting based on satellite imagery, crop acreage, rainfall, reservoir levels, cane yields, sugar recovery rates and mill-level field data.
This estimate should be updated as the crushing season progresses to account for other factors.
The principle should be simple: Data first, Policy second. This is a strong case for ensuring there is adequate domestic supplies, particularly if market signals point towards tightening availability.
For the next three months, two numbers should therefore remain on government and industry’s dashboard every week, and that is actual stock number and sugar offtake.
If these two figures are tapped accurately and communicated transparently, the country will be far better placed to ensure that consumers have sufficient sugar supplies at reasonable prices, while avoiding knee-jerk policy disruptions.
The ultimate objective should not simply be to prevent a shortage today, but to create a sustainable and shock-proof sugar policy in which the government sees a shortage coming early enough to prevent it.
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Source : ChiniMandi
