Free sugar
The constitution of a committee by the government to study issues relating to deregulation of sugar industry is welcome to the extent that it shows that the idea is still alive.
The committee is headed by C Rangarajan, chairman of the prime minister’s Economic Advisory Council, and has top bureaucrats and eminent experts on it. But the issues concerning deregulation are already known, as similar high-powered committees have been formed three times in the past and they have submitted their recommendations to the government. All these committees had favoured full or partial decontrol of the industry but the government did not have the political will to act on them. Sugar is perhaps the most politicised industry in the country where there are many vested interests and that may be the reason why it has seen continued policy inaction on the part of the government.
The industry is inefficient, technologically backward and financially crippled by various controls. The levy system by which the government collects 10 per cent of the sugar produced by mills for sale through the public distribution system is one constraint. Mills can sell in the open market only the quantities prescribed by the government from month to month. There are penalties for violation. Stock limits are imposed on them. Import and export decisions are taken by the government, and they are not always rational and in the interest of consumers, cane growers or the industry. The pricing will become transparent if mills have the freedom to sell sugar and the government can buy its requirement from the market. If the system of annual statutory minimum price (SMP) for cane continues cane growers’ interests will be protected. SMPs in a controlled market become political and electoral tools.
Deregulation will help in consolidation and modernisation of the industry and promote more investment. Experts have said that it will help to improve cane yields and sugar recovery and avert pricing and supply problems arising from the cyclical glut and shortage scenarios that characterise the industry. Sugar output and stocks during the current season are good and so this may be the right time for a decision on deregulation. The committee has been told to submit its report as early as possible. It would be cynical of the government if the initiative has come only because of Assembly polls in UP and civic elections in Maharashtra, which are the biggest sugar producing states.
