The Hindu Business Line : Bittersweet saga

THE UNSEEMLY CONTROVERSY within the government over import of raw sugar and the manner of fulfilling the export obligation is in poor taste, to say the least. The common man is unconcerned with the difference of opinion between the Commerce and Finance Ministries. He is not interested in the niceties of such esoteric concepts as grain-for-grain or sugar-for-sugar. All he wants is his daily dose of sugar, delivered at a reasonable price. How the government organises the uninterrupted supply of this essential commodity of mass consumption is immaterial. Whether imported raw sugar should be processed and the same re-exported, or the imported material be allowed for domestic consumption while the export obligation is fulfilled within the stipulated time of 24 months from out of indigenous sugar is a call the government has to take; but it has failed to announce a policy free from uncertainty. There is no reason why the sugar industry, which is in the process of getting over its recent troubles, should be subjected to such uncertainty.

Two successive years of steep decline in cane output and rapidly rising consumption has led to liquidation of excess stocks and a reversal of falling prices. Importantly, in a matter of a few months, the country has transformed itself from being an exporter to a net importer of sugar. Today, the sweetener is in short supply, and prices are on the rise. Where are the stocks? It is widely believed that a sizeable part of sugar stocks is on the registers of mills and not in the warehouses. There is reason to believe many mills have beaten the restrictive monthly release system and disposed of the goods. The market has already taken cognisance of these realities. Forward prices are firm. Soon, sugar prices can breach the psychological Rs 20 a kg mark.

To be fair, the Commerce Ministry's stand is technically correct. The advance licensing scheme allows import of raw material duty-free for export production. Under the extant scheme, the imported material has to be incorporated in or utilised for manufacture of the export product. If raw sugar has to be treated differently, the government must clearly spell out the criteria for fulfilling export obligation. Otherwise, raw sugar importers or sugar mills may be subjected to avoidable investigation at a later date.

Instead of squabbling over the manner of disposal of imported raw sugar, the government ought to take a holistic view of the sugar economy. Total decontrol should be advanced from the scheduled October 2005. The monthly release system should be dispensed with; so should the levy obligation. The Agriculture Minister is not in favour of allowing white sugar import. But the forthcoming Assembly elections in Bihar and Jharkhand, and the clout of some of the allies of the United Progressive Alliance, may force the Centre to open up white sugar imports to rein in prices.