More decontrol

Dr C. Rangarajan (centre) along with members of the committee that looked into issues relating to deregulation of the sugar sector, at a press conference in New Delhi on October 12, 2012.

HAVING followed a policy of partial control of the sugar industry since 1966, save for two brief spells of decontrol, the Centre decided to partially decontrol the Rs.80,000-crore industry for the 688-odd sugar mills in the public, private and cooperative sectors. The Cabinet Committee on Economic Affairs (CCEA) approved the move on April 4. The government had progressively pruned the levy obligation on mills from 65 per cent in 1984-85 to 10 per cent in the 2010-11 sugar season (October-September), in lockstep with its neoliberal economic policy.

Sugar for the public distribution system (PDS) will now be procured by State governments from the open market. In a written reply to a query in the Lok Sabha on February 26, Minister of State for Consumer Affairs, Food & Public Distribution Prof. K.V. Thomas conceded that while Tripura and West Bengal disfavoured the removal of levy obligation, others, including Andhra Pradesh, Chhattisgarh, Delhi, Himachal Pradesh and Andaman & Nicobar Islands, preferred the status quo so that the supply to the PDS was not affected. The Ministry clarified that the quantity of sugar procured for the PDS and its retail price for below poverty line (BPL) families would remain unchanged at Rs.13.50 a kg. The Centre will reimburse States the difference in the price from the PDS retail price for sugar procured from the open market. But this is subject to a maximum purchase price of Rs.32 a kg for the next two years.

The end of the regulated monthly release mechanism for free sale sugar, which partial decontrol entails, is to benefit the industry. It is expected that the industry will now be able to clear the mounting arrears to cane growers and also plough back investment into the industry.

It is unfortunate that the other critical issues flagged by the Rangarajan Committee, such as rationalisation of sugarcane pricing, abolition of cane area regulation and the bonding of sugarcane farmers with specific mills, and dispensing with the minimum distance criterion for setting up sugar factories, have been left for the States to address.

The scrapping of the levy sugar obligation and the regulated release mechanism was roundly assailed by the All India Kisan Sabha. In a statement, it said the decision would only promote the interests of the profit-seeking corporate sugar mills, leaving farmers, consumers and the cooperative sector in the lurch. Critics also cautioned the government that the fresh burden of Rs.2,500 crore or so on sugar subsidy would be the first casualty if sugar prices flared up. If past experience of “controlled decontrol” of the petroleum, diesel, seed, pesticide and fertilizer industries is any guide, high sugar prices for the consumers and hefty profits to sugar barons will be the unavoidable outcome.

G. Srinivasan