Decontrol calls grow on falling sugar prices

NEW DELHI: With sugar prices plunging after revised output estimates pegged production higher for this year and next, the sugar industry is pushing aggressively for decontrol.

The industry, however, wants market-linked pricing and total decontrol but has asked that the government retain the practice of demarcating cane areas of individual sugar mills with a 15 km distance between them, shielding it from competition on the input side.

Both the National Federation of Cooperative Sugar Factories (NFCSF) and the Indian Sugar Mills Association (ISMA) had suggested to the food ministry post February when sugar prices crashed from their peak of around Rs 50/kg to around Rs 35/kg that this was the “right time” for pushing through with sectoral decontrol and removing all strictures on the industry.

“In effect, they want all that is beneficial about decontrol to the industry and not much that could protect the interest of the consumer and the producers,” a ministry official in the know told ET.

MD of Mawana Sugars, Sunil Kakria told ET “Now is the best time to talk of decontrol. This is the start of the downcycle on sugar prices and the pressure on the government is lower at this point. Today, I am selling sugar at a cost lower than that of sugarcane, an average cost of Rs 245/qtl for the latter.”

“A farmer should be free to sell to whomever pays him the best for his cane,” an industry official from UP agrees, arguing that it is absurd for a cane commissioner to bind down a cane farmer to a single mill.

Kushagra Bajaj, CEO of BHL is known to openly bat for the free market philosophy of industry decontrol and dereservation of cane areas, against the more cautious approach adopted by the current head of ISMA and Balrampur Chini MD Vivek Saraogi.

Others in the ISMA, though, fear a free-for-all if cane area reservation is abolished, believing that it could once again lead to cut-throat war between sugar mills once again in periods of acute shortage.

That could be exacerbated once the Centre Ethanol Blending Programme (EBP) kicks off in right earnest and more integrated mills increase their capacity (TCD or tonnes crushed per day) triggering off faster consolidation in the industry, they emphasise, pointing out that decontrol “needs to be qualified.”

The sharp difference within the industry over abolishing cane reserve areas highlights that the sector is not yet ready for the big plunge.

Consequently, Food minister Sharad Pawar last week shot down suggestions that the decks were being cleared for sectoral decontrol.

source: ET