Indian sugar mills association

Thomas to discuss decontrol of sugar after Parliament session

Date:	22 Dec 2011

Source:	The Financial Express

Reporter:	FE Bureau

News ID:	789

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New Delhi: The food ministry will discuss the issue of shedding decades-old state control over the sugar sector with the ministries of finance and agriculture after the current Parliament session is over by December 29, food minister KV Thomas said on Wednesday.

“There is a request from the industry and the farming community that there is too much of control (over the sugar sector)... such as levy sugar. After this (parliament) session, I will discuss with Pranab Mukherjee and Sharad Pawar on how to go about it,” Thomas said at the annual general meeting of the Indian Sugar Mills Association.

At present, the government decides on the quantum of sugar mills can sell in the market each month and has mandated them to supply 10% of their output, called levy sugar, at below-cost for state-run welfare programmes. It decides the minimum price the mills have to pay for sugarcane purchases and also imposes periodical limits on sugar stocks large buyers can hold to discourage hoarding in times of a shortage. Industry executives complain that such regulations are leading to a regular cycle of boom and bust in sugar output and also stifling the growth of the sector that hasn`t attracted any foreign direct investment for years now.

In September, food secretary BC Gupta had said the government was open to lifting a decades-old control over the sugar sector if interests of farmers as well as consumers were protected.

However, industry executives said with key sugarcane-producing states such as Uttar Pradesh going to the polls early next year, a complete decontrol of the sector can`t be expected at the moment. “At best, Thomas` discussion with Mukherjee and Pawar may be about how to lighten the levy burden of the sugar industry. Also, we are still sceptical about whether the government will do any such thing, as such a move will increase the subsidy burden for the government. With the fiscal deficit widening, I don`t see it happening any time soon,” a senior industry executive said on condition of anonymity. “However, this is the only way forward if the government wants to see the sugar industry turn the corner and prosper,” he added.

The demand for the government loosening its control intensifies this year as the country is expecting surplus sugar output for a second successive year in 2011-12, after two straight years of a shortage. Sugar output in India will likely rise 3,00,000 tonne in the year starting October to 24.70 million tonne due to higher cane output, according to the food ministry estimate. The country expects to consume around 21.5 million tonne in 2011-12, leaving surplus stocks for exports, although the food ministry`s output projection is sharply lower than the industry`s forecast of 26 million tonne.

Thomas said further sugar exports will be allowed at “suitable time”. The government has already allowed one million tonne of sugar exports in 2011-12.

Food Bill in Parliament today

The minister also said the government`s ambitious food security bill will be tabled in Parliament on Thursday. The bill aims to provide legal entitlement for subsidised grain to 75% of rural households, of which at least 46% households would come under the `priority` category. Each member of the `priority` households will get 7 kg of subsidised grain a month— rice at R2 per kg, wheat at R3 and coarse cereals at R1. In urban areas, 50% of households would be covered under the scheme of which at least 28% would be accorded the `priority` status. The priority households in the urban areas would get a minimum of 3 kg of subsidised grain per person per month.

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