Stocks of sugar companies rallied on reports of a formal submission of C Rangarajan’s report on a decontrol roadmap for the industry. Rangarajan, chairman of PM’s Economic Advisory Council is expected to submit the report early morning tomorrow to the government.
At the Bombay Stock Exchange, share price of Bajaj Hindusthan closed at Rs 32.40, up 3.85 per cent from the previous day. Renuka Sugar gained 4.55 per cent to close at Rs 36.75, Triveni Engineering gained 5.35 per cen to close at Rs 23.65, Sakthi Sugars gained 5.27 per cent to close at Rs 32.95.
The Rangarajan Committee, set up earlier this year by the prime minsiter’s office (PMO), is learnt to have favoured a total decontrol of the sugar industry by doing away with the levy sugar obligation, release mechanism and freeing of export-import. While recommending the Centre’s Fair and Remunerative price (FRP) as the base price for sugarcane, the panel has suggested a profit-sharing mechanism so that farmers, too, benefit from higher sugar prices.
The committee has also recommended doing away of the state’s power to reserve sugarcane area for mills, implying farmers can sell to any sugar mill they wish, said a person familiar with the development. It has also suggested the current minimum distance of 15km between two mills be removed. The most important suggestion is on sugarcane pricing that can in effect mean an end to states’ power to set a different and higher price.
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 earlier controls in other major industries like steel and cement. Mills can sell in the open market only according to the release orders issued each month by the directorate of sugar in the Union government.
It gives mill-wise sales quotas. Mills cannot sell above this and a penalty is levied if they fail to sell within the stipulated month. Also, the government directs how much mills are to sell (presently, 10 per cent) of their output to it, at a price it fixes, for distribution through the ration shop system.
Exports are subject to government order, too. For that matter, cane procurement by mills is also decided by the government in addition to the catchment area and price.
The committee headed by Rangarajan included former Chief Economic Advisor, Kaushik Basu, CACP Chairman Ashok Gulati, the Secretaries of Agriculture, Food and Public Distribution, Secretary EAC, K P Krishnan and the former secretary of Food and Public Distribution Nand Kumar who is presently a member of National Disaster Management Authority as members.
This is not the first committee set up by the government to study reforms in the sugar industry. Recommendations of the Tuteja Committee and Thorat Committee are yet to see light of the day. While welcoming the move, a top sugar miller said the recommendations should not just remain on paper as had been the case with past reports.
