The Confederation of Indian Industry (CII) has pitched for decontrol of the sugar industry, while claiming that the current time is the most appropriate for the Government to go ahead with it.

“The new 2011-12 sugar year from October will have opening stocks of five million tonnes (mt), which, with likely production of 26 mt and consumption of about 22 mt, would result in a surplus of nine mt. There can no better time than now for decontrol,” Mr Ajay S. Shriram, Senior Managing Director of DCM Shriram Consolidated Ltd and Chairman of the CII National Committee on Sugar, told presspersons here on Monday.

Noting that sugar mills had made cane payments of Rs 55,000 crore to five crore-odd growers and their families in the 2010-11 season, Mr Shriram argued that the Government should initiate decontrol of the industry, just as it has done for cement, telecom, aviation and, more recently, fertilisers.

According to him, decontrol will not really impact consumers, as the National Sample Survey Organisation's latest data for 2009-10 show sugar to account for only 1.5 per cent of consumer expenditure in urban areas and 2.4 per cent in the case of urban areas.

Sugar's share in the average consumption basket was below any food item, including cereals, milk & milk products, vegetables, pulses, edible oils or beverages.

Making a similar point was Ms Rajshree Pathy, Managing Director of Rajshree Sugars & Chemicals Ltd and Vice Chairperson of the CII Committee. “There is a KPMG study showing that 67 per cent of sugar consumption in India is by institutional buyers (soft drink makers, confectioneries, pharma companies, etc). Only the balance 33 per cent is consumed by households, of which 10 per cent is through the public distribution system. An average family consumes 4-5 kg every month, so even an Rs 5/kg increase can easily be absorbed,”she said.

The immediate policy actions that the CII National Committee has recommended include removal of the 10 per cent levy obligation on sugar mills and dispensing with the monthly release mechanism governing even open market sales.

Sugar for ration shops should be supplied through open market purchases by the Government, while stabilisation of prices could be achieved through creation of a strategic stock to be maintained on Government account.

This will free the industry from having to bear the carrying cost of sugar that it is not allowed to freely sell.

A transparent and robust futures market will also help in stabilising prices.

The other immediate measures sought are removal of stock limits on traders and bulk users, permitting packaging of sugar in any food-grade bag (instead of only jute), stable export policy, linkage of sugarcane price to realisations from sugar and by-products (by imputing value of molasses and baggase), and finalisation of a price formula for ethanol in blending with petrol.

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