The Hindu Business Line : Sugar decontrol

The Government’s proposal on sugar decontrol and the decision to do away with release order is heartening, as the freedom to get a remunerative price was effectively curbed by taking away the timing decision. At the same time, the reported decision to eliminate the 10 per cent levy amount is ill-advised, particularly at this phase of inflation.

Sugar cane production swings dramatically, being weather- and price-driven. Now the additional claim coming from ethanol blending makes it difficult to predict supply and prices. For the sugar mills, it is too little a quantity to materially impact the bottomline. But the negative consequences are many.

Having a sufficient opening stock now is like holding a rainbow in one’s hand. That’s why, in spite of once having over 50 million tonnes of grains, the minimum support price and aggressive procurement drive for wheat and rice were not removed. The key difference this time is that the political and economic impact will be borne by the non-sugar producing States.

Sugar prices are extremely volatile. States will now have to buy the sugar from the open market, a task most of them are neither trained nor equipped to do well. The result could be failures on quality, quantity, timing and price fronts, plus the scope for scams. The States will have to set up a sugar buying department, and the Centre may have to set up a wing to verify reimbursement claims.

That is, more government jobs and certain Centre-State disputes. The proposal also puts non-sugar producing States at a serious disadvantage, as producing States will know better when to buy. They also can, in effect, restrict the movement of sugar across State borders.

Finally, the industry will still remain “controlled”. The crucial regulations that decide the industry’s fortune are the governments (Centre and States) setting minimum cane procurement prices and the locational policy, with its two-way binding on the sugar farmers and the mills to sell to and buy cane from each other.

P. Datta Kolkata