CCI to hear sugar mills' cartelisation case today

Representatives of about 25 involved sugar mills are to defend themselves tomorrow in the Competition Commission of India’s (CCI) probe into alleged cartelisation in the industry.

On July 22, 2010, representatives of these mills from Maharashtra, Gujarat, Tamil Nadu, Karnataka and Andhra Pradesh met in Mumbai. Representatives of major sugar federations and associations across the five states attended the meeting and decided unanimously that sugar would not be sold from mills below the level of the cost of production.

The cost of production last year was decided at Rs 2,700 a quintal. Hence, these mills agreed among themselves to fix a floor price of Rs 2,700 a quintal for selling sugar. It was ostensibly a voluntary initiative and not binding on any mill.

The sweetener was quoted between Rs 2,500-2,520 a quintal in a majority of spot mandis in the region on July 22. Unfortunately for sugar mills, the commodity continued to remain traded below the cost of production through the current year.

Following the minimum floor price set by mills in the five western and southern states, the spot sugar price surged by Rs 150-160 a quintal the next day, which made many decision makers raise their eyebrows and led to the investigation.

Although the decision was not strictly followed by a majority of participants and sugar was sold even below the prevailing prices the very next day, yet the government raised several questions on the integrity of such decisions.

CCI, following the lead, started investigation in the matter and issued notices to all participants, including a leading sugar refiner and ethanol producer in the country.

According to an industry source, these companies are presenting their cases before the director general of the CCI tomorrow.

“CCI had sought details from Indian Sugar Mills Association (Isma) also in February this year. We distanced ourselves from all these controversies,” said an Isma official. The sugar sector is highly controlled today and hence there is no room for any cartelisation, said Isma Director General Abinash Verma.

The government has made 10 per cent of sugar output mandatory for each mill to sell to it under the levy quota. The remaining 90 per cent of the output is released as decided by the agriculture ministry on a monthly basis.

Mills are forced to sell the allocated quantity within the stipulated time. This was the only reason for cartelisation not to work in the industry, said an industry official. Hence, after hearing the case from individual mills, CCI may relieve them, he added.