Ashna Sisodia is teaching live on Unacademy Plus
Course: Expected Questions Geo-Mains Paper GS- 1 Presented by Ashna Sisodia
Question 45: Despite efforts made by the union and state governments to address the problems of sugar industry, it is found that this industry is still reeling under many problems Examine why. (200 Words)
Answer India is the 2nd largest producer of sugarcane in the world. Its sugarcane industry problem are equally humongous. The main reasons for this are: 1. Politically determined price: Sugar industry is obliged to pay according to the administered price mechanism. With Supreme court's order fixing SAP their woes have further increased as SAP is generally higher than FRP. This also leads to price disconnect. 2. Reserve area norm: Mills are obliged to purchase all cane brought to it from a reserved area. This assurance exhort farmers to continuously increase the cropped area with complete disregard to market. 3. Global Prices: Sugar production is cyclic. Presently the global market is at the cusp of production thus sugar prices are plunging and making export less remunerative. 4. Crude oil prices: Global decline in crude oil prices cause ethanol blending less profitable hence the stocks have piled up.
As a result, there is a liquidity crunch. Over production and declining rates reduce the capacity of industry to pay farmers. On the flipside, delayed arrears to farmers is inducing another agrarian crises. It is high time that government should start deregulating sugar industry. To begin with Rangarajan Committee recommendation and Karnataka model can be used as a road map. Price deregulation, Higher import duties, Mandatory ethanol blending and extending time period of interest free loan etc. should follow to rescue sugar industry from disaster.
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