A new restriction on export of refined sugar may affect signed deals.
Union Food and Agriculture Minister Sharad Pawar on Thursday discussed the issue of sugar decontrol with Prime Minister Manmohan Singh. Pawar is learnt to have discussed doing away with the current levy obligation and the monthly release mechanism.
Stocks of sugar companies rose after the development. At the Bombay Stock Exchange, Bajaj Hindusthan, India’s biggest producer, gained 4.25 per cent to close at Rs 121.35, Balrampur Chini gained three per cent and closed at Rs 88 while Renuka Sugars gained four per cent to Rs 68.
According to sources, Pawar made a presentation to Singh about the way his ministry was planning to ease the controls. And, how this would benefit consumers and farmers, a source said. In the presentation, the minister is understood to have proposed doing away with the system of fixing the monthly quota of sugar for sale in the open market and the public distribution system. To meet the requirement for ration shops, the ministry suggested purchase from the open market.
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.
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 the 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 PDS.
Last month, Pawar had said the ministry was preparing a proposal for decontrol of sector, which would be sent to the various ministries for views. He had made it clear that the government would continue to fix the fair and remunerative price (FRP) of sugarcane to protect the farmers. FRP is the minimum price mills have to pay to procure cane.
Newswire adds: Indian sugar mills which have signed contracts to export up to 500,000 tonnes of white sugar over the past couple of months may find some deals in jeopardy as the government has made release orders mandatory for all exports.
In a circular, the Central Board of Excise and Customs said no exports would be permitted against imported raw sugar without release orders from the sugar directorate.
Sugar mills, which had imported duty-free raw sugar in February and September last year, had started exporting small quantities under the grain-to-grain policy without applying for release orders from the government. Under the grain-to-grain policy, the government allowed sugar mills to import duty-free raw sugar on the condition that they export the consignment after refining.
The policy was vague on whether the mills would need government permits for re-exports. Though the government has not banned sugar exports, it has not issued release orders, essential for exporting sugar, for more than a year.
CBEC said the Directorate of Sugar had expressed concern that “some unscrupulous persons” who had obtained advance authorisations might export sugar without release orders on the pretext that such exports were being carried out against the raw sugar imported by them on the grain-to-grain basis.
It said no further exports would be permitted even under the grain-to-grain policy without release orders. Also, the sugar directorate would take action against mills that had exported sugar against grain-to-grain imports in the current season, it said.
