The government has said that it is willing to relax some controls on the sugar industry, which, however, has given a guarded response, leaving the canvas obscure. What seems clear is that neither the government nor the industry is prepared for total deregulation. So, even as the Food and Agriculture Minister, Sharad Pawar, announced that the government would consider decontrolling sugar, he made it clear that the right to fix sugarcane prices would remain with state governments. If that is so, the proposed decontrol would involve only one or two things: ending the sugar release mechanism and perhaps also scrapping or reducing the levy on sugar. In effect, the fate of both cane farmers and the sugar industry would remain in the hands of governments.
Ironically, this may be just what the industry wants. That, at least, is the message in the note submitted to the food ministry by the private and cooperative sector sugar mills, in response to Mr Pawar’s statement on sugar decontrol. While hailing the government’s intentions on this count, the industry has spelt out the areas in which it wants official protection to continue. For instance, the industry favours continuance of the existing practice of cane area reservation for each mill along with the state-determined minimum distance between two sugar mills, and also price realisation protection in the form of guaranteed minimum returns in years of low prices. Going further, the industry has sought some safeguards in case sugar imports become necessary. Such imports, it says, should be only of raw sugar and the duty structure should be favourable to domestic sugar producers. In the case of cane pricing, the formula mooted by the sugar industry broadly conforms to international conventions.
That does not mean the idea will find favour with cane farmers. The mills have offered to share with cane growers 62 per cent of their total realisation from the sale of sugar and its byproducts — like molasses, bagasse and press-mud. When sugar prices are high, such a formula will benefit both the mills and the farmers, but that will not be the case when sugar prices drop in the regular and familiar cycle of surplus and scarcity. Farmers may not get remunerative returns in such a situation. Though a price crash works the same way for large sugar producers and small farmers, the small units have a lower capacity to absorb shocks. In any case, it is far from clear whether the central or any state government would accept such a formula because it would mean an end to the government-determined cane pricing regime, so far the main instrument to influence crucial cane growers as a vote bank. The bottom line, therefore, is that the industry does not wish to shed all its shackles and prefers to remain a government protectorate rather than learn to survive on its own in a free market.
