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PM pushes India toward sugar deregulation move

By Ankush Chibber , 30-Jan-2012

India closer to deregulating its sugar industry
India closer to deregulating its sugar industry

India has taken a step closer to deregulating its sugar industry with Prime Minister Manmohan Singh constituting a special panel to discuss and examine issues around removing government controls from the sector.

According to a statement issued by Singh’s office, the PM has constituted an expert Committee towards the deregulation aim under the chairmanship of Dr C Rangarajan, chairman of the PM’s Economic Advisory Council (EAC).

Other members of the committee include officials from the finance ministry, the department of food and public distribution, and the department of agriculture, the commission of agriculture costs and prices, and the EAC.

The statement added “that the committee has been empowered to involve such experts, academics as required as special invitees. The committee will look into all the issues relating to deregulation of the sugar sector.”

As per the PM’s instruction, the panel would have to complete its task as early as possible and give its recommendations to the PM’s office.

The announcement was met with cheer in the country’s bourses where sugar companies like Balrampur Chini Mills Ltd and Shree Renuka Sugars Ltd soared by 6.5% each, as the possibility of deregulation grew closer.

Warning signs

The first indications that sugar deregulation would be a distinct possibility this time came in December when food minister K V Thomas said that his ministry was talking to the Ministry of Finance and the Ministry of Agriculture over deregulating the sector, beginning with the removal of the levy sugar in 2012.

The Indian sugar industry currently is obligated to supply 10% of its output to the government of India, which is sent to the country’s Public Distribution System. This 10% is known as levy sugar.

Thomas said that since the issue involves a number of stakeholders including the sugar mills, farmers, state governments, and consumers, there would be a “need to discuss the issues in detail and look into the financial implications.”

Also on the agenda, Thomas said, is the removal of the monthlyregulated mechanism by which each sugar mill in the country is told how much to sell every month.

Thomas pointed out that the state governments would have to consider the long-term future of the sugar sector before announcing high and impractical cane prices (a frequent pro-farmer tactic that is executed for political aims).

He also disclosed that the industry’s demand of a cane pricing system that would see cane prices fixed in relation to the prices of sugar and its by-products is still an issue being debated by the EAC; and now by the new expert committee.

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