A Sweet Decision?: Dumping Sugar into Global Markets
India’s sugar industry is one of the largest in the world; this industry also occupies a high position of importance within India—it is the second largest industry after the cotton textile industry. The main source of refined sugar is sugarcane; altogether, the Indian sugar industry employs almost 3 lakh people. As a result, India has been called the “homeland of sugar”—for many people earn a livelihood and are able to support their families courtesy of this burgeoning sector of the Indian agricultural economy. However, as of late, it is said India may begin to occupy a dominant position in the international scheme of affairs—for the Indian government has decided to export 4 million tonnes of refined sugar to global markets by September 2016. But dumping such vast amounts of sweetener into markets may represent a not-so-sweet story to the globe.
As reported by the Wall Street Journal, “India is planning to dump a mountain of sugar on the world, and traders say the controversial move could knock the wind out of a global sugar market”. Indeed, five years of successful crops and agricultural practices have led to an enormous pile of sugar, which is currently stored by sugar refineries. However, this huge stockpile has proved detrimental to the Indian sugarcane growers, since refineries have no reason to purchase their crop; this has led to growing discontent among the farmers. So, in order to mitigate this problem, Delhi’s government has decided to export 4 million tonnes of the stored sugar into the worldwide sugar market. This way, India’s stockpile of 9.6 million tonnes will slowly ease its way out of the country, and refineries will have an incentive to purchase the crops grown by sugarcane farmers. As said by Yatin Wadhwana, head of Sucden India, “The idea is to move the entire surplus out of the Indian system”.
Effect of this action
However, this action can prove to be disastrous to the other sugar industries of the world; if such a massive quantity of sugar is dumped into the international market, the prices will automatically decrease. In fact, traders report that this action could lead to a decrease in sugar costs by 15%. As said by Tom McNeill, director of the Australia-based sugar consultancy Green Pool, “The possible additional tons of stocks that India looks like it will now export to the global market will dampen global prices” . These low prices may be good for consumers and food industries from different countries, but it will severely harm the producers, particularly in nations like Brazil—where the sugar company employs a multitude of people. However, this action will benefit Indian producers, who will undoubtedly gain through increased purchases from sugar refineries in the country.
But is this action the right thing to do? Certainly, the Indian government is doing so with the welfare of the Indian sugarcane producers in mind, but what about the state of sugar companies and factories from other competitive countries? What about the people whose livelihoods depend on their ability to make enough profit from the sugarcane and refined sugar they produce? This is one of those scenarios where there is never a clear solution—greys are inevitable. However, the Indian government should perhaps try to increase its exports at a gradual pace, so as to not flood the markets with Indian sugar in such a short span of time. Of course, it is always difficult, if not impossible, to satisfy all parties in situations like there; however, at least there can be some attempts to mitigate the losses that are caused to the other side—or to the sugar producers from other nations who will be negatively affected by this measure. Overall, this action of the Indian government is definitely not a sweet one–the best we can hope for is that the bitterness of the scenario will be mitigated by those responsible.
[Image Attribute: Humusak]