Sugar stocks need better monitoring

But common customers are also expected to get these commodities at reasonably calculated price. Recent commotion against the price rise of sugar and dal have brought to surface a very vital issue of maintaining price structure of essential commodities so that it is fair for both the producers and consumers.

But market forces are powerful enough to decide the prices of commodities, which are brought into the market through a chain of wholesalers and retail traders. Both the Union and state governments seem to have failed to control the market forces because there is no clear legislation in this regard. The traders can store stocks. Hence they can create a sort of artificial scarcity.

About 63 per cent of the total production of sugar is used for sweetening of various sweet products. Only 37 per cent is available for consumers’ consumption. Levy sugar is distributed through the public distribution system, which is not fool-proof. There is no guarantee that ration card holders would get their commodities at fair prices shops.

Checks and balances
Periodical raids on shops and vehicles carrying commodities from ration shops to private markets indicate that the system needs urgent corrective measures in order to check flow of controlled commodities to open market.

Wholesale sugar merchants purchase sugar in auction from sugar mills. Purchasing prices are mostly calculated on the basis of trends in future trading and what sugar mills expect in view of what price they are expected to pay to sugarcane farmers.
Sugar stocks, purchased by wholesalers, are kept in the premises of the concerned sugar mills with statutory provisions in order to save transport cost. This provides the time required to assess the suitable period to bring the stock into the market, when the prices soar and the profit-margin would be the maximum.

When Maharashtra government’s supply department carried out raids at various places in southern parts of the state, it is disclosed that traders from Delhi, Kolkata, and Ahmedabad as also those from Maharashtra had sugar stocks in godowns under the special protection of the National Collateral Management Services Ltd (NCMSL).
The NCMCL, formed in 1956, is governed by an independent board of directors. The promoters and shareholders of this company are reputed organisations, nationalised and even foreign banks. This indicates that both the company and its clients, wholesale traders, can get adequate financial support and credit against sugar stocks and other stocks of essential commodities.

In case of a crisis, the state government is entitled to raid the stocks, which are kept beyond 30 days. But the defence on behalf of the wholesalers was that the license Raj was abolished in 2002 and therefore subsequent orders of state governments are not valid. Besides, under the Centre’s order of 1952 wholesalers are allowed to keep stock of sugar for six months.

The Union government’s import-export policy is also a vital factor which needs proper assessment before actual decision so that while farmers as producers need not suffer and consumers will also get sugar at affordable price.
The agricultural ministry is committed to provide reasonable prices to farmers for their agricultural commodities. The commerce ministry is expected to keep due control on market forces in general and hoarding strategies in particular so much so that common consumers are not exploited by higher prices and maximum profit.
The Centre should therefore review all laws and rules controlling essential commodities and revise them (with relevant collaboration with similar laws by state governments) in larger public interest.

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