Indian sugar mills association

Wider window may come on sugar sale

Date:	18 Jan 2012

Source:	The Business Standard

Reporter:	Ajay Modi & Sanjeeb Mukherjee

News ID:	859

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Pranab, Thomas promise open mind on reforming industry control.

Instead of the present system of deciding each month how much a sugar mill is to sell in the open market, the Union government may consider a three-month permission at a time.

There are two major levers the government has to control the sugar industry. One is to impose what is called the levy sugar mechanism, of deciding how much of its total output (currently a tenth) a mill must hand over to the government at a price set by the latter, for use in the ration shop system. The other is this system of deciding how much each mill may release in the open market each month, called the release mechanism. A penalty is levied if the set amount isn`t sold.

NOT A SWEET PILL * Industry wants government to remove all controls * Mills want quarterly mechanism, which would give industry the freedom to plan sales and cash flows better * Attempts to decontrol the industry were made in 1971-72 and in 1978-79. But the steps were rolled back At a meeting last evening with finance minister Pranab Mukherjee, industry representatives argued the need to do away with both, the levy sugar obligation and the release mechanism (and to fix the final price of ethanol).

“A quarterly mechanism will give the sugar industry the freedom to plan their sales and cash flows better. This is not possible under a monthly mechanism. In the last week of most months, mills have to resort to pressure selling to avoid the quota lapsing,” said Abinash Verma, director-general of the Indian Sugar Mills Association (Isma), who attended the meet. He said Mukherjee assured them the demands would be discussed at the next meeting of the empowered group of ministers (EGoM) on the subject.

The meeting was attended by economic affairs secretary R Gopalan, financial services secretary D K Mittal, consumer affairs secretary Rajiv Agarwal, director general of foreign trade Anoop K Pujari, joint secretary (sugar) T Jacob and a joint secretary from the department of industrial policy and promotion. The industry was represented by Renuka Sugars managing director Narendra Murkumbi, Balrampur Chini managing director Vivek Saraogi, Dhampur Sugar managing director Gautam Goel and Isma president Gautam Goel.

Food and consumer affairs minister K V Thomas had recently said his ministry was open to a modified version of the release mechanism. Some positive development is expected at the next eGoM meeting (it is chaired by Mukherjee). “There are a host of issues to be looked into for initiating the process of decontrolling the sugar sector. I will soon discuss these with the finance minister,” Thomas told reporters on Tuesday.

Vijay S Banka, chief financial officer, Dwarikesh Sugar, said the proposed change in the release mechanism would enable companies to plan sales and allow flexibility to sell the quota. He, however, added the government should preferably remove all controls, especially the levy obligation.

G S C Rao of Simbhaoli Sugars said a quarterly mechanism was certainly better, as companies would not be under pressure every month. But ultimate relief would only come by abolishing the release mechanism, he added.

Sugar is one of the most controlled industries. Attempts to decontrol it were made in 1971-72 and in 1978-79, and then rolled back. The government has over the years eased such controls in other major industries such as steel and cement.

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