The Hindu Business Line : Govt set to decontrol sugar industry from October 1

The Union Cabinet is expected to soon clear the Food Ministry’s proposal recommending dismantling of the 10 per cent ‘levy’ currently imposed on mills along with the ‘monthly release mechanism’ regulating the balance 90 per cent free sale quota (FSQ).

“The decontrol note is ready. But it may not be taken up by the Cabinet at its Thursday meeting as the Agriculture Minister, Mr Sharad Pawar, is not in the country,” official sources told Business Line.

Mills are now obliged to deliver 10 per cent of the sugar they produce as ‘levy’ for the public distribution system (PDS). Even for the remaining 90 per cent FSQ that can be sold in the open market, the Centre decides (‘releases’) the quantum of such sugar to be offloaded by each mill in a particular month.

The proposal before the Cabinet is to do away with both these restrictions, so that from the 2008-09 season (October-September), mills can freely sell their entire sugar without awaiting ‘release orders’ from the Directorate of Sugar.

As regards the PDS, the State Governments will have the option to procure sugar from the open market and obtain a fixed reimbursement from the Centre for selling at below market price through ration shops.

“States such as Jammu & Kashmir or those in the North-East may be entitled to a higher reimbursement. For others, it would be a fixed rate. States can make available sugar still cheaper, provided they foot the bill on their own,” the sources added.

There have been indications of the Centre’s move towards decontrol ever since a 20-lakh-tonne (lt) sugar ‘buffer’ – maintained in factories through exchequer support for one year from May 1, 2007 to April 30, 2008 – was taken out of the FSQ when it lapsed.

Mills were allowed to sell the entire 20 lt from May 1 to September 30 without awaiting release order.

On Tuesday, the Centre announced the dismantling of a second buffer of 30 lt – sequestered for the period from August 1, 2007 to July 31, 2008 – on its lapsing date from August 1. In this case, 25 per cent of the de-buffered 30 lt was permitted to be sold freely before September 30 and the balance “at any point of time during 2008-09 sugar season without release orders.”

All these are seen as preview of the ‘real’ decontrol that will come with the new season. “The Centre’s only concern was over inflation. But with sugar prices currently ruling below the 2005 levels and the new season opening with stocks sufficient to meet six months’ domestic consumption, there is no such fear,” the sources pointed out.

As a precaution though, the Centre has released only 30 lt as FSQ sugar for July-September 2008, against 36 lt during the same quarter of last year. “The idea is to ensure sufficient opening stocks, so that mills do not use decontrol for ramping up prices”, the sources noted.

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