New Delhi, October 12
The Rangarajan Committee has recommended decontrol of the sugar sector by giving freedom to mills to sell their produce in the open market and dismantling of the levy obligation for sourcing PDS sugar at a price below the market price. For farmers, the panel suggested a share in profit margins in its report submitted to Prime Minister Manmohan Singh on Wednesday.

The Prime Minister had set up a committee under the chairmanship of C Rangarajan, Chairman, Economic Advisory Council to the Prime Minister, to look into issues relating to the deregulation of the sugar sector. The industry has welcomed the proposals. Terming the proposals “forward looking”, a statement issued by the ISMA said the move would give a boost to investment in the sector, both at the farm and the factory level. Though the report needs a stamp of approval from the government, it has sparked hope that the sugar sector is in for major reforms.

While other sectors of the economy have been freed over the years, the sugar sector continues to be under tight government control, right from production to the distribution stage.

The Centre fixes the sugar quota to be sold in the open market and for ration shops supply. Mills are also obliged to sell 10 per cent of their production, called levy sugar, at prices lower than the market rate. This sugar is used by the government for the public distribution system meant for the poor. The government, too, bears a huge subsidy burden for procuring sugar for ration shops. To free the industry from the burden of the government’s welfare programme, the panel has suggested that state governments should buy sugar directly from the open market for ration shops and sell the same at price determined by them.

It also said the Centre should give Rs 3,000 crore subsidy to the states to bear procurement expenses.

The committee also felt that the removal of the controls would not affect domestic prices and improve the financial health of sugar mills, thereby timely payment of cane arrears to farmers. To prevent piling up of cane arrears and ensuring farmers’ interest, the panel suggested retaining two important controls with some positive changes. It suggested the government to continue with fixing fair and remunerative price (FRP) of sugarcane and also make it mandatory to mills to share 70 per cent of revenue from sugar and other byproducts to farmers.

Based on the share so computed, additional payment, net of the FRP already paid, would then be made to the farmer.