Sugar stocks today rose in reaction to news reports of an imminent decontrol of the industry. Whether these hopes will be borne out in the near future remains to be seen.

But there is one long-standing demand of millers — relating to an increase in the minimum distance between two factories to prevent ‘unhealthy competition' for cane — that is seemingly getting met.

The Centre has allowed two State Governments — Punjab and Haryana — to notify a minimum radial distance of 25 km to be maintained by any two mills. This is as against the current norm that permits no new mill to come up within the radius of 15 km of an existing (or even another new) factory.

Besides Punjab and Haryana, Maharashtra, too, is proposing to raise the minimum radial distance between two factories from 15 to 25 km. The State Government will soon be seeking the Centre's approval to enable this, Maharashtra's Minister of Cooperation, Mr Harshvardhan Patil, said at an industry meet in Pune on Sunday.

The Centre had, on November 10, 2006, amended the Sugarcane Control Order, 1966, permitting State Governments to enhance the minimum radial distance between two factories beyond 15 km, “with the prior approval of the Central Government”.

But till now, no State had exercised that option, as it was perceived to go against the interests of cane growers. The industry, on the other hand, has been lobbying for an increase in the minimum distance from 15 to 25 km — which, it claims, is necessary to secure sufficient cane area for individual factories to be viable.

Cane wars

The November 2006 amendment had, in fact, come in the wake of the ‘cane wars' that had seen leading sugar majors in Uttar Pradesh, especially Bajaj Hindusthan Ltd and Balrampur Chini Mills, filing Industrial Entrepreneur Memoranda (IEMs) to set up mills in each other's established area.

The Maharashtra Government's current move to implement the amendment has also apparently been triggered by the rush to file IEMs. In the last six months, the State Government has received 141-odd IEM applications, against which it has issued aerial distance certificates for 91 mills.

“Since the increase in minimum distance to 25 km will apply only prospectively, it may not have any impact. Moreover, the bulk of the new IEMs have been filed by promoters of existing cooperatives, wanting to secure cane area for themselves. The increase in the minimum distance norm will now help create a secondary market for the IEMs already granted”, sources pointed out.

Meanwhile, the proposed plan for decontrol of the sugar industry is expected to be discussed ‘informally' at a meeting of the Prime Minister, Dr Manmohan Singh, the Finance Minister, Mr Pranab Mukherjee and the Agriculture Minister, Mr Sharad Pawar, next week.

The precise modalities and timeline for decontrol would be worked out only after this meeting, the sources added.

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