Lois For Sugar Units Now Valid For Only 1 Year

The government has cracked down on pre-emptive licensing for sugar units in tune with reforms recommended by the World Bank

In a move to curb pre-emptive licensing, the government yesterday reduced the validity of letters of intent for new sugar units to one year from three years.

Stating conditions for any extension, an official release said the new norms were meant to ensure that licensed capacity was created according to schedule to guard the interests of farmers, the industry and consumers.

We are reducing the value of the LoI and putting a greater premium on companies ability to set up the unit. It is also a step towards reforms in the sugar industry, said a senior official in the industry ministry.

The industry ministry also announced guidelines under which companies planning to set up sugar units will have to have the confidence of farmers. In awarding a licence to set up a unit , endorsement by a farmers association is important, the official said.

Both the initiatives have been taken in the background of an abortive attempt by the industry ministry to pilot a proposal through the cabinet to delicense the sugar industry. One of the objectives of the ministry was to curb the practice of pre-emptive licensing, which was the bane of the `licence raj abolished in 1991. By reducing the validity of LoIs, the government has de facto ushered in delicensing, officials added.

In its press release yesterday, the industry ministry noted that many LoIs do not fructify throughout the entire initial validity period of three years. As a result, other applicants are also deprived of the allocated locations. Other locations which fall within a radius of 15 km from the site mentioned in a valid LoI are also ruled out for other applicants.

If the entrepreneur is not serious, the farmers in the zone allocated to the proposed unit suffer for no fault of their own. Consumer interests too are adversely affected, says the release.

Apart from reducing the validity period of the LoI, the industry ministry has also listed certain parameters for approval of a companys request for extension.

These include:

Acquisition of land for location of sugar mill;

Commencement of civil works;

Placement of order for plant and machinery;

Filing of application for term loan if required.