Of late, there has been confrontation between growers and millers over price. Growers demand higher price for their raw material and millers complain about increase in production cost and imports. A study it revealed that more than 65 per cent farmers have decreased the total area under cane production due to water shortage, behaviour of the mills’ management, late payments, increased input cost, and diseases and rodent attack. Constraints faced by the growers are underweighting of cane at purchase centres and mill gates, undue deductions by mills up to 10 per cent, delays in payments, middleman, obtaining an indent, and the payment of premium.
The price structure is such that out of the sale price some 35 per cent of the cost goes to farmer and 24 per cent to the government in taxes etc., 21 per cent to mills with nine and six per cent to wholesalers and retailers respectively. The country exports sugar at low price and imports the same at high rates. Transporters, particularly trolley-owners also exploit mill owners by demanding additional Rs250–300 per trolley during cane shortage, while a delay in unloading at the gate incurs an additional Rs100 per day for trolley along with the provision of food and tea for trolley drivers etc by the mills. The government intervenes by issuing export permits to mills, importing sugar on public account and controlling retail distribution below the market price through utility stores
Consumption relationship indicates the price elasticity for refined sugar as four and income elasticity as eight in nominal terms. This implies that relatively small change in cane supply causes more proportional increase in sugar price.
These factors create shortage thus increasing the price of the commodity. These...