Inaugural Address at the Kingsman Conference 11th September, 2012, held in Delhi:
Mr. Jonathan Kingsman, President of Kingsman SA and the prime-mover behind this conference, Shri Gautam Goel, President, Indian Sugar Mills Association (ISMA), Mr. Jayantilal B. Patel, President, National Federation of Cooperative Sugar Factories, Shri Narendra Murkumbhi, distinguished delegates, friends from the media, ladies and gentlemen: a very good morning to you.
It gives me immense pleasure to be amongst you all at the Kingsman Conference which has been organized to visit the sugar sector of the country and to deliberate on important issues concerning it, seen as it is not only from the national perspective but from the international dimensions as well. I would like to extend a special welcome to those of you who have travelled from abroad to attend this important conference.
The sugar sector has long played an important role for millions of rural households across the world, as a source of employment and income generation. Sugar is one of the most important agricultural commodities traded internationally. The value of world sugar trade exceeds USD 24 billion annually, of which developing countries account for more than 80 percent, underpinning the impact of the sector on the livelihood of sugar farmers, many of whom are smallholders. In the Indian context the sugar economy is approximately USD 16 billion and impacts 50 million farmer families. The growth of India as the world’s biggest consumer of sugar and a major producer has been recognized internationally. This is amplified by the fact that Kingsman have made their conference in India an annual feature.
Friends, India is the largest consumer of sugar, the current level of consumption standing at about 23 million tonnes, growing at an annual rate of 4%, much higher than the global average, probably owing to rising incomes and changing consumption patterns in favour of confectionery and sweet-based drinks. After Brazil and Thailand, India is the third largest exporter of sugar, bracketed with Australia. The unique impact of India lies in its being an import and exporter of sugar alternatively, providing swings to the global sugar markets. From an entirely plantation white sugar producer India has graduated to a producer of sizeable quantities of raw sugar as well refined sugar for the global markets.
The conference, I am sure will deliberate, on the various issues facing the sugar world. There have been some setbacks in the normal cycle of sugar production which has resulted in abnormal and unexpected rise in sugar prices in the past few months. However, the situation is fast improving with the major exporters recovering and promising to enter the global market. On the Indian front we had two seasons of good production and were hoping for another good year with increased acreage under sugarcane. A delay in the monsoons may impact some areas but the overall analysis at this stage suggests that we may have taken steps towards tackling the infamous Indian sugar cycle. (I understand the subject will be discussed at the conference). Many informed commentators have estimated the ensuing sugar production in the range of 23.5 to 25 million mt. We, in the Government, will however, formulate our first estimate by the end of this month in consultation with State Sugar Commissioners as per the usual practice. It can, however, be said today that we are likely to produce enough sugar during the year 2012-13 to meet the consumption demand and perhaps have a small exportable surplus.
Dear delegates: you are all aware that recent global sugar trends show that the sector has suffered underinvestment at both factory and farm levels, evidenced by the fact that world sugar production was not able to keep pace with the fast growth in consumption over the last 10 years, leading to a draw down in sugar reserves to historical lows. In fact, world sugar stocks fell to their lowest level in 20 years in 2010-2011. It is with pride that I can state that during this period India was an exporter supplying the world with its surplus sugar. A come back to a global surplus position is a matter of comfort to us as the largest consumers.
In addition, amid rising demand for bio fuel, as a supplement to transportation fuels, the production of sugarcane-based ethanol has grown significantly over the last decade. It is estimated that in 2012, at the global level, about 20 percent of sugarcane production is used for the production of ethanol. Bio fuel offers sizeable opportunity to the sugar sector, but it also raises great challenges to our global food system. This will be tested in the current season when maize production in the US has been hit adversely affecting ethanol production. Where sugarcane competes for arable land and water, it puts additional strain on our already scarce supplies of productive resources, thereby contributing to the upward pressure on food prices. As illustrated by the FAO Food Price Index, food prices increased by 79 percent between 2006 and 2011, and they are now back on the rise prompted by the prospects of tight grain supplies. However, where sugarcane does not compete directly for resources with food crops, bio fuel can yield positive net effects, as it develops rural communities, provides environmental benefits, and lowers a country’s exposure to oil price volatility. A proper balance between food crops and sugarcane will therefore have to be maintained as we strive to increase sugarcane production. Also sugarcane must take its place as a bio-energy crop rather than a source of sugar alone.
Still, realizing the full benefits of bio fuels entails better policies. Large and generous tax credits for blenders, tariffs on imported bio fuels, and agricultural support for grain producers all hindering low-cost sugarcane based ethanol producers from competing on a level playing field. Clearly, bio fuel policy reforms are needed to alleviate some of the risks that prevent greater investment in the sugar sector. These structural trends are likely to influence the sugar industry beyond the next decade and have significant implications for sugar producers in developing countries.
India’s growth as a sugar producer has largely been propelled by its own internal consumption demand. The increase in per capita consumption is likely to continue and with an increasing population the requirement in the coming years is projected to go up. It is heartening to note the conference is also looking at issues related to logistics and infrastructure as important components related to the growth of the sector. The progress made by the Indian sugar industry in production forecasting and the increased use of technology for the same have also given comfort to the policymakers in taking important decisions related to the sector.
The theme of this conference last year was decontrol of Indian sugar industry. We have been conscious of the need to revisit the regulations. A high level committee has been tasked with the brief to make recommendations in this regard. We are expecting the report of the committee to be submitted soon. This will give us an opportunity to modernize the regulatory framework for sugar sector consistent with interests of consumer, farmer and development of the industry.
The transition may not be at the pace desired by the industry but the sensitivities of the different stake holder need to be considered as this transition takes place. I can only request the stake holder to exercise patience during this process of change.
Finally, I compliment Kingsman SA and the organizers for fielding a very prominent team of highly competent and eloquent Indian and international speakers for the conference. We are grateful to all the participants for taking time off for the special conference, and for the lively discussions expected here from which our industry and stakeholders could greatly benefit, especially from the rich and varied experience delegates from every corner of the world are going to share with us.
In parting, I have a word for the international delegates: please take time off during this visit to India to enjoy and see a little of our country before you return to your homelands. Let me assure you, India’s rich history and cultural and geographical diversity will reward you with an experience you will cherish forever.
THANK YOU!
