Six point proposal agenda for sugar decontrol

Decontrol imperative for the prosperity of all stakeholders – farmers, consumers, Government and millers.

CII has constituted the ‘CII National Committee on Sugar’ to take up the key policy issues of the Indian Sugar Industry and to ask for Decontrol of the Sugar Industry.

Decontrol of the Indian Sugar Industry would result in vibrant growth of the Sugar Sector leading to self sufficiency and reduction in cyclicality with further diversification of the value added products i.e producing green power and also addressing the energy need of the country through ethanol. Decontrol is also imperative for the prosperity of all stakeholders – farmers, consumers, Government and millers.

Mr Ajay S Shriram, Chairman CII National Committee on Sugar & Chairman & Senior Managing Director, DCM Shriram Consolidated Ltd said,” The Indian Sugar Industry is being strangulated by so many controls be it raw material prices (cane prices), availability, sales volume, stock limit, levy obligation or export of surplus, the government decides everything. It is for this reason that the sugar industry is urging the government to remove all kinds of regulations and set it free. The industry is seeking decontrol in the larger interest of all the stakeholders.”

He added,” For self sufficiency of Indian sugar industry there is a need to bring about reforms across government policy and regulations, increase the attractiveness of cane cultivation to the Indian farmer, move towards a market-driven price mechanism, remove cyclicality and have a pro-active international trade policy for sugar. This is possible through decontrol of the sector.”

CII proposes the following 6 point agenda for phased decontrol of Sugar industry:

- Monthly release Mechanism and stocking of Sugar - There is a regulated monthly release mechanism scheme which governs supply and sale of sugar in the market. Further, stocking of sugar as per the government norms has cost the industry around Rs. 40,000 crore in the previous year, denting industry’s margin significantly. Monthly release scheme should also be dispensed with and the government should itself maintain strategic stock.

- Supply of Sugar for PDS - The sugar industry is required to bear 10 % levy sugar obligation for providing sugar to the government for public distribution system (PDS) at prices much below the cost of production. The estimated loss to the industry last year on account of this has been about Rs. 3000 cr. Such a financial burden is not imposed on any other industry. The Government should procure the sugar from the market and then give it for PDS as done for all the other commodities.

- Lack of linkage between sugarcane price & sugar and by-product prices- There is no linkage between cane prices paid to farmers, sugar prices and its by-products (molasses and Bagasse). A proper and transparent pricing mechanism of sugarcane will help the industry as well as the farmers in strategically planning demand-supply in the market, and thus reduce volatility in availability of sugar as well as prices. Therefore, the government must consider linking sugarcane prices to sugar and by-product prices (imputed value of Molasses and Bagasse).

- Sugar Industry Can’t Export Under OGL - Even during the years of surplus production, the sugar industry could not export its surplus stock under open general license. It had to abide by the export quota decided by the government, even during surplus years, defying any economic rationale for such an obstructive policy. A stable export policy under the OGL scheme and removal of stock limit on traders and bulk users will help the industry.

- Packaging Issues- The government decides on the packaging material for sugar and the industry is not allowed any say. Industry should be allowed to use any food grade material for this purpose to cut down costs and organize its sale and stock handling in more effective manner.

- Multiple Governing agencies - Problem is further compounded by the fact that multiple ministries and departments govern the industry. Some of these conflicts relate to announcement of the Fair & Remunerative Price (FRP) and State Advised Price (SAP) etc. For establishing a level playing field and for removal of regulatory distortions, such conflicts need to be resolved.

Ms Rajshree Pathy, Vice Chairperson, CII National Committee on Sugar & Chairperson & Managing Director, Rajshree Sugars & Chemicals Ltd, spoke about some key issues of the Indian Sugar Industry,” Rationalization of Sugar prices both the levy and non-levy would provide a boost to the sector, in terms of cane production and investment in mill capacity and bring considerable benefit to the consumer in terms of price stability. The Consumption pattern of sugar shows 2/3rd usage by bulk and industrial consumption, thereby making the commodity less critical to calculation of the Wholesale Price Index of individual buyers. The share of sugar is just 2.4 % and 1.5 % of total consumer expenditure for Rural and Urban India. From the point of view of household consumption, even for a low income household, a 10 per cent increase in sugar price would result in less than 1 per cent increase in the monthly food expense.”

She added regarding cyclicality of the sugar sector “The cyclicality in sugarcane and sugar sector is an inherent feature today, the industry suffers both during years of shortages as well as surplus years this could be corrected and production stabilized with decontrol of the sugar sector. “

Mr. Chandrajit Banerjee, Director General, CII, addressed the gathering and reaffirmed CII’s view that in order to streamline all policy issues to the best advantage of farmer, industry and consumers and to ensure a buoyant growth for the sugar sector complete liberalization of the sugar sector through decontrol is a must. He further stated that with decontrol, sugar prices will be determined by the market forces thus ensuring better competition and benefits to all the stakeholders involved including cane farmers and consumers besides industry.

source: indiainfoline