Sugary start

The recommendations for partial decontrol of the sugar sector, made by a high-level committee headed by the chairman of the Prime Minister’s Economic Advisory Council, C Rangarajan, are welcome, but the distortions in the industry will continue, even if they are implemented. A number of other panels have made suggestions in the past but they were not implemented. Governments have made promises to accept them but have been shy of action. Reform plans have been in the air for the last 50 years but the sector continues to be backward and inefficient. Both farmers and mills, main stake holders, have complaints about the existing policies. They need to be changed and if the government accepts the Rangarajan panel recommendations and implements them, it may mark a beginning.

Two important recommendations are to scrap the rule that there should be a minimum distance of 15 km between two sugar mills another one that mandates a farmer to sell his cane only to a particular mill. Abolition of these rules will introduce some competition in the industry where there was none. The farmer can sell his produce to the mill that gives the best price and new mills can come up in reserved areas, thus forcing existing mills to become more efficient. Productivity of both farmers and the mills can increase as a result. But the government’s control over the sector will not be relaxed. It will continue to fix the price of sugarcane to be paid to the farmers. Though the panel has recommended that the 10 per cent levy on the mills for supplying sugar to the public distribution system should be abolished, it may not make any difference. This is because the subsidy element will be retained and it will be routed through state governments.

The changes that may be brought in will not be significant. The problems in the sector will continue because it is difficult to deregulate a sector in instalments. The sugar sector has always been highly politicised and is controlled by interests which do not promote the cause of the farmers, the mills or the consumer. Wild fluctuations in sugar prices which hurt the interests of all are the result of policies framed to help the vested interests. Sectors like steel and cement and even other agriculture-based sectors have not been subjected to so much regulation. It is time the sector is pushed towards real deregulation.

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