India sweetens up on sugar deregulation in 2012

By Ankush Chibber

- Last updated on GMT

Related tags: Manmohan singh

Decision soon to be made on Indian sugar deregulation
Decision soon to be made on Indian sugar deregulation
The Indian government is firm on sugar decontrol and would step back from this sector by the end of this year, a top official on the committee in charge of deregulation said.

C. Rangarajan, who is heads the committee studying deregulation of the Indian sugar sector, said that his panel would submit its report within six months after which deregulation measures would be notified.

“We are trying to outline all the issues facing the sugar sector. We are meeting after one month again and in six months’ time we will submit reports,”​ he said.

India took its most affirmative step towards deregulating its sugar industry, second largest in the world, when prime minister Manmohan Singh set up the panel to discuss and examine issues around removing controls from the sector.

The seriousness of the government’s measure could be gauged by the fact that the Prime Minister chose Rangarajan, the chairman of his Economic Advisory Council (EAC), to lead the committee.

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 sugar industry, including the Indian Sugar Mills Association and other industry bodies, has long been asking for deregulation; something that experts and market analysts had long deemed a utopian wish.

“We are serious…”

But this utopian wish could soon be reality if one goes by the noise made by the men in charge. “We are serious about reforms in the sugar sector. We realise that this is one sector where the potential has not been fully utilized,”​ said Kaushik Basu, chief economic adviser to the finance ministry and member of the committee.

Deregulation would begin with the removal of the levy sugar in 2012. The Indian sugar industry currently supplies 10% of its output as ‘levy’ to the government of India, which is sent to the country’s Public Distribution System.

Also on the agenda is the removal of the monthly-regulated mechanism by which each sugar mill in the country is told how much to sell every month and a system that would fix cane prices in relation to the prices of sugar and its by-products. This is backed by the Indian Sugar Mills Association.

Government, keen to keep prices in check in the nation of more than 1.2 billion people, currently sets the price mills must pay to farmers and buys 10% of their output, called levy sugar, at a big discount for its welfare schemes.

The government also decides how much sugar will be sold in the open market and at times imposes limits on stocks that large buyers can hold — all measures which some industry players say lead to a cycle of boom and scarcity.

India is estimated to produce 26 million tonnes of sugar in the 2011-12 crop year ending on 30 September, higher than the annual demand of about 22 million tonnes.

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