The Hindu Business Line : Time for full decontrol

The Expert Group that is to examine the issue of sugar decontrol has its job cut out. Conceded that the sugar sector is already in a partial-decontrol mode, but only in going the whole way can there be a healthy development of the industry and trade. The conditions for total decontrol are propitious. The demand side is robust. The economy's health and growth prospects would ensure sugar's notable contribution to the burgeoning food processing industry. Without doubt, the sugar industry deserves more freedom in terms of production, marketing and export/import trade. Therefore, the `levy' system and `free-sale quota' must go.

Supply-side issues need attention. The Statutory Minimum Price for cane must continue as a measure of protection for growers. When the SMP is fixed and marketing restrictions on sugar are removed, output prices will automatically adjust themselves and remain in a certain proportional relationship with input costs. For the Public Distribution System, the Government must buy from the open market and bear the subsidy, if any. The cyclical nature of production — the bane of the industry — can be broken only when a holistic view of the entire supply chain is taken. Cane price rationalisation is critical. Investment decisions on expansion and modernisation must be market-driven rather than dependent on state sops.

At the same time, the industry also has obligations towards cane growers and consumers. Checks and balances are needed to ensure that cane arrears do not accumulate. Consumer interest can be protected with a liberal import policy. As the Indian market integrates with the global market, developments elsewhere have to be factored in. In Brazil, the world's largest producer, for instance, cane is increasingly perceived as a fuel, than as a food, crop. Cane and sugar industry economics today are not what they were, say, even five years ago. A sound biofuel policy with a long-term perspective is the need of the day. Growers can capture value by improving the quality of cane and raising yields, and the industry by efficient supply chain management, sugar quality assurance and by-product utilisation.

The Expert Group will therefore have to make recommendations that would advance the interests of all stakeholders. A major concern of policymakers all these years has been the fate of cooperative sugar mills in a decontrolled environment. Cooperatives have inherent strengths that need to be leveraged. Consolidation of fragmented capacities, quality upgradation, aggressive marketing, professional management and consortium approach to the market bear serious consideration. A special time-bound scheme to strengthen Maharashtra's cooperative mills — they contribute close to a third of the sugar output — so that they are able to effectively function in a decontrolled environment is needed. The next cane harvest will begin in October. The industry would be well served with adequate notice of decontrol.