The proposals for liberalisation are welcome but nagging doubts remain on the fate of the system of setting the statutory minimum prices (SMP) and its more contentious version — state-advised cane prices (SAP). Even if the Union government chooses to stop fixing cane prices — though the chances of it happening are not too bright in an election year because the step may be viewed as a measure against cane growers — the uncertainty about ending the SAP system is far greater. The state governments, which usually fix cane prices far above the SMP and resort even to litigation to enforce them to secure the cane growers' political support, are unlikely to give up the practice so easily. The argument that the sugar factories would tend to keep the cane growers in good humour to ensure adequate raw material availability may not be bought by all these states. Should that happen, it would defeat the very purpose of the decontrol move.

Moreover, cane pricing is not the only imponderable in the present exercise. The timing of the move is also not incontestable, especially considering the present domestic and international sugar scenario. After two years of high sugarcane and sugar production, the output of both is set to drop perceptibly in the coming sugar season. The fear is that sugar output in the next season might drop to just 21-22 million tonnes, close to the anticipated consumption level, even while the prospects for sugar exports may improve further due to tight supplies in the global sugar bazaar. The International Sugar Organisation has predicted that world sugar production in the 2008-09 season would fall 1-2 million tonnes short of the expected consumption as Brazil, the key cane producer, is likely to divert more than half its output to ethanol manufacture. This might keep the international sugar prices relatively firm, making conditions for exports from India favourable. A combination of low, as also seasonal, production and higher exports would tend to push up domestic prices, which, even while improving the price realisation for sugar producers, may prompt the government to review its decision on dismantling the monthly sugar release mechanism, if not the decontrol move as a whole. In the past, at least on two occasions, in 1972 and 1978-79, the government had allowed voluntary sugar distribution under partially decontrolled conditions, but only to retract their steps soon in both the cases. What is really needed for such policies to succeed is total freedom for the sugar trade and industry to take their business decisions in a free market, supported ably by active futures trading to allow price discovery and risk hedging. The government would, therefore, do well to revisit its pending proposal and go in for total de-regulation and decontrol to impart stability to the sugar sector.