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Lobbies wade into Indian sugar regulation debate

By RJ Whitehead , 19-Nov-2012

Now some time has passed since the Rangarajan Committee revealed its recommendations to remove restrictions on the sugar sector, industry groups have begun to put pressure on the government to accept or reject its findings.

Chaired by distinguished octogenarian economist C Rangarajan, the independent committee had been charged by the government to look into reforming industry regulations that are widely considered outdated.

Its wide-ranging findings earlier this month advocated the removal of levies, the freedom for mills to sell sugar on the open market and introducing a stable export and import policy. 

In the long run, it also recommended doing away with cane area reservation and minimum distance criteria for setting up sugar mills, and suggested the removal of controls on by-products like molasses. It also moved for linking sugar and sugarcane prices. 

Government might act at last

KV Thomas, the union food minister, later said that the government would consider the Rangarajan report and take a decision on removing some of the industry’s curbs next month.

Calling out to the government to abolish the regulated release mechanism and remove the levy system, the Indian Sugar Mills Association (Isma) and the National Federation of Co-operative Sugar Factories (NFCSF) said the current process was making the industry uncompetitive.

The sugar industry has missed the liberalisation bus, while all other industries that have been liberalised have grown,” said Gautam Goel, president of ISMA. “It is high time that the government removed the archaic controls that the industry is burdened with.”

Sugar is defined as a regulated sector, which means that the central government decides on the quantity of the commodity that mills are allowed to put on the market each month. On top of this, sugar mills are obliged to sell 10% at a cheaper rate as levy sales to the government, with the sugar then distributed to the public.

The removal of the levy obligation will benefit the industry worth INR3,000 crore annually,” added Goel.

The sugar industry has the potential to grow from the present INR80,000 crore to INR1.6 lakh crore, said Abinash Verma, director-general of Isma. He ruled out the possibility of cartelisation in the sector, as the industry is fragmented.

Vocal opposition

However, not every group is for the normalisation of the sugar industry. Earlier this week, farmers in northern India had called on the government to scrap the panel’s recommendations on the abolition of state-advised pricing.

The panel had suggested that 70% of sugar transactions be paid to farmers. But the farmers argued that a revenue-sharing formula was not fair and would not provide for a level-playing field for the northern states, where the sub-tropical climate influenced cane recovery and yields.

In the south, meanwhile, farming groups claimed that the Rangarajan panel had “betrayed” them in favour of the private sector.

Aiyilai Siva Suriyan, district secretary of Tamil Nadu Vivasayigal Sangam, released a statement to say that the committee’s recommendations would inflict incalculable harm on farmers, cooperative sugar mills and consumers.

Either the recommendations of the committee should not be implemented or all the frontline farmers’ bodies should be consulted before its implementation,” he advocated.

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