Maharashtra sugar industry bats for decontrol

Last Updated: Wed, Jun 13, 2012 19:50 hrs

Maharashtra’s Rs 26,000-crore sugar industry, which contributes nearly 30 per cent to India’s total sugar output, would formally make a case for decontrolling the sector.

As a first step, the industry wants the government do away with the levy obligation and procure sugar to be distributed through the Public Distribution System (PDS) from the open market.

Officials from the industry are scheduled to meet members of an expert committee on sugar, headed by the Prime Minister’s Economic Advisory Council Chairman, C Rangarajan, on June 14. Industry officials are set to urge for removing sugar from the Essential Commodities Act, especially since most sugar consumption is accounted for by the commercial segment.

A senior official of the Federation of Cooperative Sugar Factories in Maharashtra, a representative body of over 170 mills, told Business Standard, “Liberalisation and reforms were adopted by India from the late 90s. However, sugar and the sugarcane sector remained totally ignored. This sector continues to be highly controlled by the government. Nearly 1.25 million sugarcane growers and farm families come under the sugarcane and sugar sectors. Sugarcane growers earn about Rs 18,800 crore a year by way of cane prices. We, therefore, hope with the Rangarajan committee’s positive recommendations, the sugar sector would be in a position to ensure the pace of growth in its resources is ahead of the demand on it.”

According to the federation, during the sugar season, the Centre procures 10 per cent of sugar with prescribed prices as levy sugar. However, these prices are well below open market prices and the cost of production. “During the 2011-12 crushing season, Maharashtra produced 89.6 million tonnes of sugar, and 10 per cent levy obligation comes to 890,000 tonnes. On account of this, at an average levy price of Rs 1,893 per quintal, the loss stand at Rs 767.87 crore, owing due to the difference between average open market realisation and levy prices. This results in cane prices being lower by Rs 100 per tonne," the official said.

State Cooperation Minister Harshvardhan Patil, who is set to make a presentation on the issue on behalf of the Maharashtra government, also supported the federation’s demand for decontrol. He said there was a need to remove the release mechanism to ensure in complying with the release orders, factories were not forced to sell sugar below the cost of production.

The federation official said all regulations on the sale and distribution of sugar, including the release mechanism and stock holding limits on bulk consumers and traders, should be done away with.

The sugar industry in the state would also make a case for de-linking the Sugar Development Fund interest rate from the bank rate. It would also pitch for interest to be charged at only four per cent.

According to the federation, linking the SDF interest with the bank rate was irrelevant, as the industry contributed to the SDF. Since Maharashtra's contribution to SDF was about 70 per cent, the allotment of loans to cooperatives should be proportionate to their contribution, the industry said.

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