Government In No Hurry On Sugar Decontrol (05-Sep-2010)
Despite having the backing of the agriculture and food ministry, the proposal to deregulate the sugar industry is unlikely to see the light of the day anytime soon. While the sugar industry has been lobbying for at least a partial deregulation, the government probably does not want to take any chances and is going slow on the issue.
Earlier, Union Agriculture and Farm Minister, Sharad Pawar, had held a meeting with the Prime Minister, Manmohan Singh, last week, wherein the former is understood to have made a strong case for decontrol of the sugar industry.
Sugar is perhaps the most tightly regulated commodity in the country at present. Although the government has relaxed some of the measures that were imposed last year after sugar prices surged sharply, the sector continue to attract a number of restrictions. Government still fixes the minimum sugarcane prices, and issues a monthly release quota for each mill. Also, mills have to sell 20% of their output at a below market price to the government for its public distribution system (PDS). If a mill fails to sell its allocated quota any month, the remaining amount of the sweetener is automatically converted into the levy sugar.
The farm minister has however pitched for a number of reforms in the sector including dismantling the monthly release mechanism, scrapping the practice of levy sugar and de-reserving cane area. The latest proposal means growers will no longer be bound to sell to a particular mill which is currently done by prescribing a minimum distance between two plants.
While the proposals have been supported by the industry and many economists believe these may help bring greater efficiency into the sector, the central government feels that a rapid decontrol of the sugar sector could be too risky. It has, in this context, asked the opinion of the state government before making any next move.
However, experts feel that such a step will certainly delay the sugar decontrol efforts as states are likely to take their time in replying to the Central government. Also, the views of sugar-producing states like UP and Maharashtra is not going to converge with those of the consuming states. Finally, even if some states do agree with decontrol, each one is going to recommend different conditions before deregulation is done, something that will probably be too much for the Centre to implement.
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