Indian sugar mills association

Ministerial panel to discuss sugar decontrol

Date:	18 Jan 2012

Source:	The Financial Express

Reporter:	Banikinkar Pattanayak

News ID:	855

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New Delhi: A ministerial panel will consider lifting the decades-old control over the sugar sector to improve liquidity of cash-strapped factories.

Finance minister Pranab Mukherjee is learnt to have told a visiting delegation of top sugar industry executives on Monday that their demand for freeing mills from the obligation to supply 10% of their output to the government at below-costs for welfare programmes—known as the levy sugar—and the monthly release mechanism need to be discussed at length. He assured them that this will be referred to the ministerial panel, according to a senior sugar industry executive.

The delegation comprised Indian Sugar Mills Association president Gautam Goel, vice-president M Srinivaasan, director general Abinash Verma, Balrampur Chini Mills managing director Vivek Saraogi and Renuka Sugars managing director Narendra Murkumbi.

“The Finance minister was also apprised of the fact that some farmers` bodies are also in favour of decontrolling the sector. He seemed positive towards our concern,” added the executive.

The sugar sector was first brought under the government control in the 1940s and, currently, the government decides how much of sugar mills will sell in the open market every month apart from the levy obligation. It fixes the minimum price the mills have to pay for sugarcane purchases and also imposes periodical limits on sugar stocks that large buyers can hold to discourage hoarding in times of a shortage. The industry says these regulations are leading to a regular cycle of boom and bust and bleeding the balance sheet of companies. Demand for decontrol intensified this year as the country is producing surplus sugar.

Sugar mills are facing losses up to R3,000 crore a year on account of subsidised supplies to the government for the public distribution system. The industry says scrapping the levy mechanism will inject R3,000 crore to the cash-strapped sugar sector.

Last month, food minister KV Thomas had said he would discuss with the ministries of agriculture and finance whether and how to loosen the tight control over the sugar sector.

Farmer leaders are divided over the issue. While Consortium of Indian Farmers Association secretary general P Chengal Reddy is in favour of the removal of “restrictions on sugar levy and release mechanism”, Bharatiya Krishak Samaj President Krishan Bir Chaudhary opposed any such idea.

Some other farmer leaders demand that cane areas allocated to specific mills be de-reserved first so that mills will compete among themselves to purchase the crop from farmers before the government takes any step to decontrol the sugar sector. Industry executives, however, cite the example of the development of the cement sector after the state control was lifted to push for their case.

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