Indian sugar mills association

Sugary prospect

Date:	31 Jan 2012

Source:	The Business Line

Reporter:	Editorial

News ID:	891

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Yet another panel to look into sugar decontrol? That would be the natural response of many to the Government`s latest move to appoint an Expert Committee “to examine issues relating to the sugar sector”. One can understand the cynicism, given the numerous official bodies set up in the past with each one of them virtually making the same set of recommendations: Free mills from `levy` obligation and dismantle the monthly `release` mechanism to enable them to decide the quantum, timing and the price at which to sell, as in other commodities. But there is hope, not without reason, to believe things might be different this time. For one, unlike the previous committees that were initiatives of the Food Ministry, the present one has been constituted by the Prime Minister, Dr Manmohan Singh, with the Chairman of his Economic Advisory Council, Dr C. Rangarajan, heading it. Also, it has members who are unequivocal liberalisers — the Chief Economic Adviser in the Finance Ministry, Prof Kaushik Basu, the Chairman of the Commission for Agricultural Costs & Prices, Dr Ashok Gulati, and the former Agriculture Secretary, Mr T. Nanda Kumar. On top of it is the timing: The Government is under lot of pressure to give a fresh lease of life to reforms once the ongoing assembly elections (including in India`s top sugarcane producer, Uttar Pradesh) get over in about a month. Sugar decontrol represents a low-hanging fruit — compared with politically trickier deregulation of diesel or urea prices — that the ruling alliance can nevertheless use to refurbish its pro-reform credentials.

The current time is also just right to go in for complete deregulation. With production of over 25 million tonnes (mt) and opening stocks of 6 mt, there is more than adequate supply to meet projected domestic consumption of 23 mt for the year ending September 2012. That rules out any serious price increase threat, even after allowing for export of up to 3 mt. If at all prices rise, they would only incentivise mills to pay more to cane growers, thereby augmenting supply and contributing to long-term price stability. In any case, controlling sugar prices has little meaning in today`s context, where the basis of food inflation has shifted from calories to proteins. The existing edifice of controls on sugar and even grains were erected during the 1970s, when vegetables and animals products formed a minuscule portion of Indian diets.

The present Committee should go beyond sugar to also consider issues pertaining to pricing and area reservation in sugarcane. While mills are justified in seeking marketing and pricing freedom in sugar, they cannot deny the same to farmers. So long as mills expect State Governments to earmark cane areas for them, they would have to continue paying prices fixed (`advised`) by the latter. Decontrol of sugar, without dispensing with cane area reservation or restrictions on setting up new mills, would be a sham.

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