Agriculture minister’s public assurance on sugar decontrol fuels optimism, on top of other positive indications.
After export permits and relaxation in stock holding limits, more sweet news may be awaiting the sugar industry. The government is expected to discuss the long-pending issue of removing more controls on the industry this month.
Sugar stocks rallied today on this indication. Most stocks gained three to six per cent on Monday, while the market closed flat.
||Closing share price
at BSE on Monday
|Per cent gain over
Union agriculture minister Sharad Pawar indicated in Pune last Saturday that there was serious thinking in the government on sugar decontrol. “Sugar is the only sector in which restrictions are still there. The thinking process has started and some pragmatic decision is expected to be taken. There will be an in-depth decision on all the issues of the sugar industry,” Pawar said.
A delegation led by Maharashtra chief minister Prithviraj Chavan recently met Prime Minister Manmohan Singh to push for sugar decontrol, along with other demands like more export of the item.
Sugar is one of the most controlled industries in India. Attempts to decontrol it were made in 1971-72 and in 1978-79, only to be rolled back. The government has over the years eased controls in other major industries such as steel and cement.
The control on sugar is exercised by, among others, the release mechanism and levy obligation. Sugar mills can sell in the open market only according to the former. The directorate of sugar in the Union government issues release orders every month and gives mill-wise sale quotas.
Mills cannot sell above this quota. A penalty is levied if they fail to sell the quota within the stipulated month.
Under the levy obligation, mills have to sell 10 per cent of their produce to the government at a lower than market price. This is supplied to below-poverty line families through the public distribution system.
In recent months, things had been improving for the industry. In March, the stock a bulk buyer could hold at any point of time was increased from 200 tonnes to 500 tonnes. This led to positive sentiment. It is expected the limits would be relaxed further. Compared to a blanket ban on sugar export in the last financial year, the government since April has allowed export of a million tonnes. Ethanol blending is another area of revenue for most integrated sugar companies.
“Sugar prices are rising on fundamentals suddenly turning favourable. The Indian Sugar Mills Association has been demanding another 10, 00,000 tonnes of export quota during this sugar year amid guarantee that the quantity will not squeeze supply in the domestic market. A slight reduction in Brazil’s crop estimate has also helped appreciate the price, which we believe will continue in the days to come,” said B J Maheshwari, director, Dwarikesh Sugar Industries.