India ponders sugar deregulation in 2012

22-Dec-2011 - Last updated on 22-Dec-2011 at 17:27 GMT

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The Indian Ministry of Food is in discussions with state governments and associated ministries to remove controls over the country’s sugar industry in the new year.

Food minister K V Thomas said on December 22 that his ministry was talking to the Ministry of Finance and the Ministry of Agriculture over deregulating the sector, beginning with the removal of levy sugar in the new year.

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 currently, Thomas said, is the removal of the monthly-regulated 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 Economic Advisory Council to the Prime Minister.

Limbo?

Reacting to Thomas’ statements, the owner of a major sugar mill operator in the state of Maharashtra told FoodNavigator-Asia on the condition of anonymity that he did not expect the industry’s demand to be met.

“The current government has been leading the way in pro-agri policies in all other sectors. I do not think they will have the courage to make any changes here. At best, this issue will remain in limbo if not rejected,” he said.

He pointed out that the sugar industry needs the removal of levy sugar and the monthly-regulated mechanism that are currently harming the long-term sustainability of sugar mill operators like him.

“Only then will we be able to export more. The crushing season is near, and we need to pay the farmers. Global prices are higher [than domestic prices] and we need to be able to export now before they drop. They are likely to,” he said.