1. Narendra Modi govt’s bid to tame soaring sugar prices scuttled by states

Narendra Modi govt’s bid to tame soaring sugar prices scuttled by states

Only 3 states have acted on the Centre’s directive on stock limits.

By: | New Delhi | Updated: August 2, 2016 7:58 AM
The Union food ministry, in late April, stipulated that a dealer or trader could hold up to 500 tonne of sugar — except in parts of West Bengal — under the stock-holding rule. (Reuters) The Union food ministry, in late April, stipulated that a dealer or trader could hold up to 500 tonne of sugar — except in parts of West Bengal — under the stock-holding rule. (Reuters)

The Centre’s move to check hoarding and curb a price rise in sugar has been dealt with a rude shock by states. Three months after the Centre authorised states to impose limits on sugar stocks traders and dealers can hold to discourage hoarding, just three states — Karnataka, Maharashtra and Delhi —have acted on the central government’s directive, sources told FE. Also, of these three states, Maharashtra and Delhi completed required formalities only around a week ago, they added.

The Union food ministry, in late April, stipulated that a dealer or trader could hold up to 500 tonne of sugar — except in parts of West Bengal — under the stock-holding rule. The stock-piling limit for a dealer in Kolkata and extended areas in West Bengal was set at 1,000 tonne. Dealers can’t hold sugar for more than a month from the day of receiving the stocks, the food ministry said.

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Apart from Uttar Pradesh, the traditional epicentre of massive cane arrears, other key sugar producing and consuming states such as Tamil Nadu, West Bengal, Uttarakhand, Bihar, Haryana and Punjab are yet to even notify the stock limits, providing adequate fodders to hoarders.

According to the usual procedures, states are supposed to first notify the stock-holding limits and then issue a separate order implementing the licensing system for dealing in sugar. This means all traders and dealers are supposed to register themselves with the state concerned to get licenses for selling sugar. Importantly, while Maharashtra notified the stock limits on May 26, it hadn’t issued the relevant order requiring dealers and traders to register with the state government until a week ago.

Prices of sugar, which have surged over 40% since the current marketing year started on October 1, 2015 on fears that sugar output in 2016-17 could drop, have continued to rise unabated even after the food ministry’s notification on stock limits in late April. Already, according to a preliminary estimate by the Indian Sugar Mills Association, the country’s sugar production could drop 7.3% to 23.26 million tonne in 2016-17, marking a second straight year of decline. Wild speculations to profit from the dip in output have made the matter worse.

States are also free to fix stock-holding limits as well as the period of holding sugar, but those can’t be higher than the caps set by the food ministry. In this case, the states neither imposed limits set by them nor implemented the caps fixed by the Centre.
Sugar analysts feel since both the Opposition and the general public usually attack the centre on inflation, the states — which must share a major portion of the blame for supply-side shocks, as agriculture is a state subject — go scotfree despite acute inaction and administrative sloth. To ensure that sugar prices don’t surge due to manipulations by hoarders, the Cabinet on April 27 decided to introduce, after a gap of close to five years, the stock-piling limits.

Apart from capping stocks delaers or traders can hold, the centre has taken a series of measures in recent weeks to curb a rise in sugar prices, including imposing a 20% duty on exports and suspending an earlier order for the compulsory sugar exports of 3.2 million tonne.

Before the suspension of mandatory export policy, mills had shipped out roughly 1.5 million tonne, out of the 3.2 million tonne of sugar they are mandated to export under a provision whereby the government provides subsidy of R4.5 to farmers for the supply of every quintal of cane for sugar production. The government last year directed sugar mills to export, a move aimed at reducing a glut in the domestic market and arresting a slide in the price of the commodity, which had resulted in massive cane arrears. Mills were required to export the entire quantity of sugar by the end of the current marketing year (September 30).

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