Government
should get out of the sugar business
Shakir Lakhani
APRIL
17, 2020
No one should have been surprised at the
recent report on sugar and wheat shortage in the country, which caused a split
in the ruling party. It was only natural for the core members of the party to
feel bad when they saw the sugar barons getting wealthier while they continued
to remain mere spectators. One hopes that they persuade the Dear Leader to end
government control of the industry and stop supporting the sugar barons in
their nefarious attempts to get subsidies in future.
For a start, the government should immediately
end guaranteed minimum prices for sugarcane, sugar protectionist import tariff
of 40 percent, subsidised transport costs and domestic freight, reduced export
taxes, and export quotas. These measures have enabled manufacturers to earn
billions at the cost of the common man, as local sugar prices are much higher
than in most other countries.
It is time the government got out of the sugar
business. It should let the market determine price of sugar, depending on
supply and demand. But this is not the only thing it should do. It should buy
excess sugar and maintain adequate stocks to protect the people from sudden
price hikes. It should also allow the free import of sugar whenever it feels
such a step is necessary.
The present government policy of interfering in
the sugar industry actually encourages formation of cartels by mill owners.
With prices fixed by the government, there is no incentive for sugar
manufacturers to be competitive. There is no incentive for them to become
internationally competitive. Once the industry is deregulated, mill owners will
try to reduce their cost of production and would be induced to manufacture
value-added products like ethanol fuel, molasses, etc.
Of course, there will be problems in the
beginning. Sugar barons in parliament will fight tooth and nail as deregulation
will mean an end to subsidies doled out by practically every government in
recent years.
Government should also give incentives to sugar
cane growers to switch over to other cash crops like rice, which do not consume
so much water and can earn valuable foreign exchange for the nation. Presently,
the growers are at the mercy of unscrupulous mill owners who deliberately delay
buying sugar cane. The longer the delay, the greater the loss to the growers.
By indulging in negotiations of prices after every harvest, and taking their
own sweet time, the sugar cane loses weight thus resulting in reduced payments
to the farmers (who are paid according to weight).
The farmers, therefore, get much less than the
support price fixed by government. The delay also results in them not being
able to prepare their lands for the next crop. This arrogance of the mill
owners can only be reduced by complete deregulation of the sugar industry.
The government should not delay any more. The
Great Khan has a golden opportunity to rid the country of this curse. The
nation cannot afford to lose money by giving subsidies every year to the
criminals in the sugar industry. This one step alone will earn the immense
gratitude of the people and will increase the popularity of the ruling party.
The writer is an engineer, a former visiting
lecturer at NED Engineering College, an industrialist, and has been associated
with the petroleum, chemical industries for many years
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