National 2 (Spotlight Weekly)

Blow To The Farmers

The reduction in the import tariff on sugar deals another blow to the sugarcane farmers already suffering from low prices

By THAKUR AMGAI

A boy carrying sugar : Constraint in supply

Over the last four years, the price of sugar has increased by 100 per cent. To make the pain of the soaring prices worse, there has been sugar shortage in the free market several times, particularly, during the festival times when its consumption soars. The shortage in the free market has forced the consumers buy the same product at much higher rates in the black market. The situation worsened because of the carteling and syndication by the sugar traders. Nepali government had been imposing very high tariffs on the import of sugar in the name of protecting the local industries.

However, the sugar trader/producers, on one hand could not produce sugar as per the demand of the consumers and started to use the privilege given by the government to hike prices and create artificial shortages at the drop of a hat.

With a view to stabilize the market, the government has decided to waive the tariff on its import by 15 percent to encourage importers to import more sugar from foreign market. Whether it would sooth the agony of the consumers is yet to be seen. But what is clear at this point is, the sugarcane farmers - who are already suffering because of the low prices on sugar offered by the sugar traders/producers, will be hard hit by the decision.

Sugarcane farmers are already suffering because of the frequent strikes and blockades, which causes the sugarcane to dry up and fetch lesser price. Claiming decreased productivity of such sugarcane, sugar producers have been giving a lower price to the farmers. Many farmers are already shifting from sugarcane farming to other crops because of the low price fetched by the sugarcane thanks to frequent disturbances. The lack of raw materials caused because of this shift has largely affected the sugar production creating a deficit in the supply compared to the demand.

There was an acute shortage of sugar this festival season, too (November). Customers who were willing to pay higher prices got the sugar from the back doors. Soon after the Tihar festival was over, sugar was available freely in every retail shops. The road blockade called by the Maoists gave the traders another pretext to hide the sugar and sell at higher prices. Customers were forced to pay as high as Rs. 50 per kg for sugar during that time. After the lifting of the blockade, the sugar has started to become more easily available, but the prices are still hovering above Rs. 40. The market monitoring team of the Department of Commerce recently caught more than half a dozen retailers selling sugars at very high rates.

The high tariff on the import of sugar is a reason for businessmen not to be lured in the import of sugar. The Ministry of Supplies had given authority to the National Trading Limited and Salt Trading Limited for the import of sugar after acute shortage of sugar in 2001. But because of the vehement protest of the sugar producers and sugarcane farmers and a writ petition filed against it at the Supreme Court, none of the organizations could import sugar.

The market of sugar has taken a worse turn after Birgunj Sugar Mill, the largest mill of the country run by state, closed down ostensibly for privatization. The mill has neither been privatized nor is producing sugar.

Nepal could be self-dependent on the production of sugar. Even without the Birgunj Sugar Mill, the sugar production capacity of the other private mills exceeds the demand. With the Birgunj Sugar Mill in operation, Nepal is capable of exporting sugar. However, it is an irony that the consumers face shortages of sugar time and again.

"The government should have focused on the rights of sugarcane farmers encouraging them to plant sugarcane," said an activist working in the sector of consumer rights. "The production of sugar will automatically rise and the supply will come to equilibrium."

However, because of the lack of cost monitoring the consumers are also facing a plight to pay the price as marked by the suppliers. Narayan Sanjel, under secretary at the Ministry of Supplies informed SPOTLIGHT that the formation of Sugar Board was in the offing, which would monitor the market and bring out policies for improving sugarcane farming.

The price of cane reduced from Rs. 134 per quintal to Rs. 120 last year. which prompted the sugar farmers to protest the decision. The farmers and the producers reached an agreement after the price was fixed at Rs. 124. Following the reduction in the price of the cane, many farmers shifted from sugarcane farming to other crops. This has resulted in the shortage of raw materials for sugar producers.

Diwakar Golchha, vice-president of the Sugar Producers Association has already forecasted Nepali sugar producers will not be able to produce sugar as per the demand next year. Narayan Sanjel said this is one of the reasons that that prompted the ministry to take the decision (of reducing the import tariff).

With the reduction of the import tariff, it is expected that the private parties will be lured to the import of sugar so that there will be no shortage of sugar when the domestic mills cannot supply as per the consumers' demand. "We have reduced the tariff to overcome the prospective shortage of sugar," said Sanjel. "Consumers will get the sugar at reasonable prices throughout the year."

Sanjel informed that the imported sugar is likely to be cheaper than the price prevalent in the market at present. The price of sugar in the retail market ranges between Rs. 40 and 50 per kg.

This year, when the price of sugarcane is Rs. 142 per quintal, the millgate price of sugar is fixed at Rs. 29 per Kg. Inclusive of Value Added Tax and other local taxes, transportation, and profit margins and the overheads the retail price of sugar is almost Rs. 40 this year. The retail price was Rs. 30 last year when the mill gate price was only Rs. 22.

It is also forecasted that, if not imported from other countries, sugar will be in short supply next year, too. Nepali consumers need 150,000 metric tones of sugar this year. The production of sugar last year was 100996.4 MT. This year it could be even less.

Among the chief reasons of sugar producers not being able to produce sugar as per their capacity are the lack of raw materials and political disturbance. The mills, which are supposed to run for about 120 days, ran for less than 90 days last year thanks to the frequent strikes.

"The government's decision (to reduce the import tariff) that was taken just as the season (for sugar production) is beginning will hit us hard," said Arun Chand, one of the prominent sugar producers of the country. Government officials point their fingers at the sugar producers for not producing sugar up to their capacity and creating artificial shortage of sugars whenever they get chance (like blockade, festivals etc). The government had been imposing very high import tariffs on sugar "to protect the local industries."

The production of sugar has been largely affected by the political instability of the country. "We cannot ferry canes to the factory in time because of the frequent bandhs and blockades and because of this the sugarcane dries and the production is highly reduced," explains sugar producer Chand.

Moreover, sugar farming has decreased largely because of the reduction in the price of cane last year. Sugar production is a seasonal industry, which runs for about five months from November to April.