A Sweet Little Problem

Context: As a surplus sugar cane producer, India needs to become a major exporter; however, there lie many challenges.

Issues with the sugar sector:

• Classic sick industry: In India, sugar is a part of public procurement. While the government wants to create a free market, due to surplus production, it is looking for exports.
  • Issues with the subsidy: It can lead to bumper crop leading to accumulation of debts by banks;-- credit flow to innovative businesses gets reduced, and thus growth stagnates.
• Issues with exports:
  • Prices of Indian sugar is too high: and no foreigner will buy it. (Chicago wholesale has a price of Rs 24.50/kg while the government has promised Rs 30/kg).
  • Ban of export subsidies by the World Trade Organisation (WTO): Brazil and Australia have asked WTO to prevent India from giving them.
  • Tough competition: Brazil exported ten times as India. While Thailand, four times as much sugar. The US is the biggest importer, but it imports mostly from Brazil and Mexico.
  • Conflict with China: While Chinese are increasing consumption, due to the conflict with India, they are looking towards Australia and Indonesia for imports.

Conclusion: India is now a surplus agricultural producer, and needs to become a major agricultural exporter. Agricultural reform requires effective political persuasion.