Private, coop sectors urge govt to decontrol sugar

Want to start with an end to monthly release order and PDS levy.

Private and cooperative mills today requested the Union government to remove controls on the sugar industry, starting with dismantling the release mechanism (by which the government decides how much sugar can be sold in a given month and when) and the levy obligation (to hand over a certain portion of a mill’s output for ration shops at a government-decided price).

The petition also sought a realisation-based price for sugarcane and removal of sugar from the Essential Commodities Act. The proposals have come from the Indian Sugar Mills Association (Isma) and the National Federation of Cooperative Sugar Factories.

The industry has been demanding decontrol for long, but there have been differences between the two associations. The industry has been encouraged by the recent government decision to decontrol petrol prices.

“We need long-term clarity to grow. The government should bring a policy that will be in the long-term interest of all stakeholders,” said Gaurav Goel, chairman, policy advisory group, Isma, and managing director, Dhampur Sugar Mills.

The industry has suggested that farmers be paid based on realisation from sugar, molasses, bagasse and press mud. The industry has offered to pay 62 per cent of the combined realisation from these products.

The domestic sugar cycle is likely to move from a deficit to surplus. Against a five-year low output of 14.5 million tonnes in the 2008-09 season (October-September), the output in 2009-10 is estimated around 18.5 mt. The industry projection for 2010-11 is 23-24 mt, equivalent to annual domestic consumption.

Sugar is one of the most controlled sectors in India. Attempts to decontrol sugar were made in 1971-72 and again in 1978-79, only to be rolled back. In that period, the government has eased controls in other major sectors such as steel and cement.

Mills may sell sugar in the open market only in accordance with the release mechanism. The Directorate of Sugar in the Union government issues a release order every month, giving mill-wise sale quota. Mills cannot sell anything above this quota. A penalty is levied if they fail to sell the quota within the period. The government tweaks this in times of shortage. In the current year, for instance, the government resorted to a weekly quota and then a fortnightly quota.

Another primary control is the levy obligation. At present, mills must sell 20 per cent of their annual produce to the government at a price lower than the market one. This sugar is supplied by the government under the public distribution system.