The sugar industry’s wait for an end to stifling restrictions and regulations seems to be eternal. Even as the Prime Minister’s Economic Advisory Council, headed by C Rangarajan, had reportedly chalked out a detailed road map for sugar decontrol, the prime minister, instead of acting on it, chose to appoint another committee – headed by Rangarajan himself – to go into all the related issues. This has given rise to more suspicion than it has quelled about the government’s real intentions concerning deregulation. The timing of the announcement, coming in the middle of the Assembly election process in three major sugar-producing states of Punjab, Haryana and Uttarakhand, further compounds misgivings, given the sector’s deep-rooted politicisation. Sugar-sector reform is a subject that has been probed by umpteen numbers of committees and expert panels, two of them – the Tuteja committee and the Thorat committee – during the United Progressive Alliance (UPA) rule itself. Most of these committees have unanimously recommended complete decontrol and deregulation of this sector. Senior government functionaries, including several ministers, have been making the right noises over this issue. Yet, the dilly-dallying in taking a final decision continues.
Indeed, this seems to be an ideal time for lifting curbs on this sector, since sugar production is on the upswing and its inventories are building up after surplus output in 2010-11 and 2011-12. The current glut has already depressed domestic sugar prices from the highs they touched in 2009, and unless the right moves are made now it may be difficult to sustain the uptrend through 2012-13. Certainly, previous moves to decontrol sugar – as early as 1971-72 and 1978-79 – were a fiasco, and had to be retracted; but those were different times, when the industry was underprepared for existence without government intervention. Now, for the first time, the entire sugar industry (including the cooperative sector, which accounts for nearly 45 per cent of the total output), feels confident of standing on its own and is, in fact, unanimously demanding freedom from officialdom. A significant lesson that ought to be learnt from past experience is that the decontrol has to be complete; a piecemeal approach, as tried out in the past, will not work. The industry’s obligation to part with 10 per cent of its output as levy, at prices lower than the production cost, needs to be done away with. In addition, the curbs on domestic and external trades through monthly release mechanism and export limits need to go.
Importantly, the prices of sugarcane, the chief raw material for sugar production, need to be linked to the ultimate realisation of the industry from the sale of sugar and its by-products — which, in other words, means profit-sharing with the cane farmers. Only then can the industry survive and take its own business decisions, ending the cyclicality in sugar and sugarcane production, and thereby ensuring stable sugar prices for consumers.