The Centre, which is under attack for rising sugar prices, is weighing the option of asking bulk consumers, like makers of sweets, soft drinks, fruit juice, chocolate, ice cream and biscuits, to use only imported refined sugar instead of buying domestic supplies.
The move will impact a host of fast moving consumers goods companies including multinationals like Coca Cola, PepsiCo, Britannia apart from domestic firms like Parle and scores of sweetmeat makers.
Sources in the ministry of food and consumer affairs told Business Standard that it has sought the law ministry's views on the subject.
Bulk consumers account for over 65 per cent of India’s sugar consumption. Data available with the department and sugar industry shows that of the 15 million tonnes that bulk consumers use, sweets account for 45 per cent, soft drinks 30 per cent, ice cream 10 per cent, chocolate 10 per cent and biscuits 5 per cent.
Sugar accounts for 3.72 per cent of the Wholesale Price Index. Prices are rising owing to an acute shortage — production in 2009-10 was just 16 million tonnes against annual consumption of 23 million tonnes. The pressure is unlikely to ease in 2010-11 with production pegged at 21 million tonnes.
Consumer activist and Maharashtra Congress party leader Kanhaiyalal Gidwani suggested that restricting bulk or industrial consumers from using domestic sugar would release additional supplies into the open market and cool prices.
“These bulk consumer companies will be given a three-month period until April to make arrangements to import sugar. After that, if they are caught buying domestic supplies, the government can initiate action under the Essential Commodities Act," he said.
"The government move is impractical, not feasible," said a beverage industry executive requesting anonymity.
Private and cooperative millers, who preferred not to be quoted, think the decision would also hit sugar producers because it would lower their net realisations below Rs 10,000 a tonne.
