The high-level committee on sugar, headed by the chairman of the Prime Minister’s Economic Advisory Council, C Rangarajan, has done well to suggest sweeping reforms targeted at unshackling the sugar sector from needless controls and regulations. But it has fallen short; it should have recommended total decontrol. Under the recommendations, the right to fix the fair and remunerative price (FRP) for sugarcane and the revenue-sharing arrangement between the industry and cane growers will continue to rest with the government. Also, though the panel suggests the abolition of the 10 per cent levy on the sugar industry for procuring sugar for the public distribution system, the subsidy for this purpose is proposed to be retained and channeled through the state governments.
Some significant reformist suggestions include ending the system of fixing the amount of sugar each factory can sell in the market and reserving the sugarcane area for the supply of cane to each factory. This would allow sugar mills to take their own business decisions and enable farmers to sell their cane to any factory of their choice. Equally notable is the committee’s recommendation to end the practice of state-advised price (SAP) for sugarcane in several key sugar-producing states. Few states will agree, though, given the political clout of cane growers. The two-phased cane price payment arrangement conceived by the panel involves paying the Centre-determined FRP to farmers at the time of delivery and adjusting it against the final payment, amounting to 70 per of the total revenue generated by each factory. Predictably, though the sugar industry seems comfortable with this mechanism, farmers have reservations about moving away from the SAP system.
Why has the Rangarajan panel not suggested an end to the Centre’s role in cane price determination? The sugar industry is unlikely to exploit growers, given the two groups’ interdependence. If anything, power lies with cane growers, who have the option to shift acreage to other crops if they’re dissatisfied with the price they receive. This has happened in the past, contributing to the cyclic nature of sugar production. Though the Rangarajan report deserves to be accepted and implemented, it is not certain whether it will be. Similar road maps for sugar sector reforms suggested in the past by several committees – the Mahajan committee (1998), the Tuteja committee (2004), the Thorat committee (2009) and the Nandakumar panel (2010) – have remained unimplemented, even though ministers murmured positive words. Besides, misgivings arise from the fact that all attempts to open this sector up, especially since 1971, have failed — thanks chiefly to half-hearted implementation. The best course for the government would, therefore, be to wash its hands of the sugar sector completely, and let it fend for itself — like most other agro-industries. A piecemeal approach will not work.
