NEW DELHI: The government may go in for total decontrol of sugar in one sweep. By scrapping all curbs in one go, instead of the earlier plan for phased decontrol, the Centre will let Indian sugar mills compete more efficiently from the next season onwards.
The liberalisation will mean mills will be able to sell sugar freely in the market. With no cane area reservation, mills will benefit from a direct link between the prices of cane and sugar. The matter is now under the consideration of Prime Minister Manmohan Singh.
Agriculture minister Sharad Pawar had earlier suggested a two-phase roadmap for decontrolling sugar. But the Prime Minister’s Economic Advisory Committee had rejected his proposal, calling it “distorting” in its present form. Instead, it had argued for decontrol at one go.
In his comments sent to the Prime Minister, the panel’s chairman, C Rangarajan, had stated: “The Pawar proposal takes up the easier part of the regulatory reform, involving the net fiscal outgo, in the first phase. While the more difficult aspect of doing away with the cane reservation system and the distribution criteria between factories have been proposed in the second phase, after the receipt of the report of the expert group on the sugar industry.”
“It is advisable that a decision on the regulatory reform of the sugar industry be taken at one go and implemented together,” Mr Rangarajan said in his report. As the expert group on the sugar industry will be submitting its report in the next few months, a view on the entire gamut of reforms will be taken simultaneously.
According to the proposal made by the ministry of agriculture, phase one would have focused on removing the 10% levy on mills, with the government switching to buying sugar from the open market for the fair-price shops.
This would have allowed mills to sell their entire produce freely in the market, by doing away with the monthly release-order mechanism. In turn, the government would have used customs tariffs to stabilise prices.
According to the proposal, the Central Sales Tax (CST) Act would also have been amended to include denatured alcohol on the list of goods of special importance, to make ethanol production and movement ‘hassle-free’ across the country.
In phase two, the ministry had proposed doing away with the cane reservation system and the distance criteria between mills. This would set up a framework for a uniform cane price, linked to sugar prices within the statutory minimum price system. It would have also done away with all the remaining curbs on the industry, including repealing/amending of the Sugarcane Control Order; the Sugar Control Order, 1966; the Levy Sugar Supply Control Order, 1979; and the Sugar Packing and Marking Order, 1970.
The current proposal to decontrol the sugar industry in one go may be well timed. The industry is banking on prices to climb in 2009, as low cane planting and lower sugar production globally will reduce the excess supply. Also, with crude oil prices hovering around $120/barrel, the ethanol industry in Brazil may consume more cane than the sugar factories.
Such a scenario would make it easier for Indian mills to compete more efficiently, without any likelihood of a steep fall in sugar prices. Farmers will be able to get better prices for cane once their fortunes are no longer tied to just one mill. Consumers, too, will get a better deal as supply will no longer be artificially controlled by the government.
The liberalisation will mean mills will be able to sell sugar freely in the market. With no cane area reservation, mills will benefit from a direct link between the prices of cane and sugar. The matter is now under the consideration of Prime Minister Manmohan Singh.
Agriculture minister Sharad Pawar had earlier suggested a two-phase roadmap for decontrolling sugar. But the Prime Minister’s Economic Advisory Committee had rejected his proposal, calling it “distorting” in its present form. Instead, it had argued for decontrol at one go.
In his comments sent to the Prime Minister, the panel’s chairman, C Rangarajan, had stated: “The Pawar proposal takes up the easier part of the regulatory reform, involving the net fiscal outgo, in the first phase. While the more difficult aspect of doing away with the cane reservation system and the distribution criteria between factories have been proposed in the second phase, after the receipt of the report of the expert group on the sugar industry.”
“It is advisable that a decision on the regulatory reform of the sugar industry be taken at one go and implemented together,” Mr Rangarajan said in his report. As the expert group on the sugar industry will be submitting its report in the next few months, a view on the entire gamut of reforms will be taken simultaneously.
According to the proposal made by the ministry of agriculture, phase one would have focused on removing the 10% levy on mills, with the government switching to buying sugar from the open market for the fair-price shops.
This would have allowed mills to sell their entire produce freely in the market, by doing away with the monthly release-order mechanism. In turn, the government would have used customs tariffs to stabilise prices.
According to the proposal, the Central Sales Tax (CST) Act would also have been amended to include denatured alcohol on the list of goods of special importance, to make ethanol production and movement ‘hassle-free’ across the country.
In phase two, the ministry had proposed doing away with the cane reservation system and the distance criteria between mills. This would set up a framework for a uniform cane price, linked to sugar prices within the statutory minimum price system. It would have also done away with all the remaining curbs on the industry, including repealing/amending of the Sugarcane Control Order; the Sugar Control Order, 1966; the Levy Sugar Supply Control Order, 1979; and the Sugar Packing and Marking Order, 1970.
The current proposal to decontrol the sugar industry in one go may be well timed. The industry is banking on prices to climb in 2009, as low cane planting and lower sugar production globally will reduce the excess supply. Also, with crude oil prices hovering around $120/barrel, the ethanol industry in Brazil may consume more cane than the sugar factories.
Such a scenario would make it easier for Indian mills to compete more efficiently, without any likelihood of a steep fall in sugar prices. Farmers will be able to get better prices for cane once their fortunes are no longer tied to just one mill. Consumers, too, will get a better deal as supply will no longer be artificially controlled by the government.
No comments:
Post a Comment