Encouraged by the government move to decontrol petrol prices, the domestic sugar industry has renewed its demand for freeing the sector. The Indian Sugar Mills Association (Isma), the sugar lobby group, is working with renewed vigour and has sought meetings with food and finance ministries.
“We are pressing hard for it. The government has decontrolled a vital commodity like petrol and is keen on reforms. Now, we are hopeful that sugar decontrol will also see light of the day,” said Vivek Saraogi, president of Isma and managing director of Balrampur Chini Mills, the country’s second-biggest sugar company. A food ministry official, however, said till now nothing had been thought about decontrolling sugar.
Last week, the government decontrolled prices of petrol and said a similar step would be taken for diesel So far, the government used to determine petrol prices, which were kept lower than the cost. The losses incurred by public sector oil marketing companies were made up through government bonds and discounts from government oil producing companies.
Sugar is one of the most controlled industries in India. Attempts to decontrol it were made in 1971-72 and in 1978-79, only to be rolled back.
The government has over the years eased controls in major industries like steel and cement. The control on sugar is exercised by way of release mechanism and levy obligation.
Sugar mills can sell in the open market only according to the release mechanism. The Directorate of Sugar in the Union government issues release orders every month and gives mill-wise sale quotas. Mills cannot sell above this quota. A penalty is levied if they fail to sell the quota within the stipulated month.
The government tweaks this system when there is a shortage. This year, for instance, the government resorted to weekly and fortnightly release mechanisms. Under levy obligation, mills sell a certain per cent (currently 20 per cent) of their produce to the government at lower than the market price. This is supplied to below poverty line families through the public distribution system.
An industry expert said this was the right time to decontrol sugar, as the sugar cycle was set to move from deficit to surplus. Against a five-year-low output of 14.5 million tonnes in the 2008-09 season (October-September), the output in 2009-10 is estimated to be close to 19 million tonnes.
The output in 2010-11 is projected at 23-24 million tonnes, equivalent to domestic consumption. A decontrol would not have a major impact on prices, he said.
