Cabinet defers sugar decontrol proposal

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Sugar millers in India might have to wait a little longer for unshackling their industry from government controls as the Cabinet on Friday deferred a decision to decontrol the sugar industry by amending the Sugar Control and Regulation Order (1960).

“The Cabinet discussed the proposal and decided to defer a decision on the same,”science and technology minister Kapil Sibal told reporters after a meeting of cabinet committee on economic affairs.

Though Sibal didn’t spell out any reason for deferring the decontrol proposal, but sources said some Cabinet ministers raised objection to the fact that after decontrol even central agencies have to purchase sugar from the open market for running their operations.

“The lingering concern over rising inflation and the fact that sugar has a weightage of over 3% in the wholesale price index also went against the proposal to decontrol the industry,”an official source said.

The FE reported on August 7regarding a meeting of sugarcane commissioners from major growing states pegged next year production at around 22 million to 23 million tonne, down from 26 million to 27 million tonne mainly due to fall in acreage and low yields from some states. This could have further pushed sugar prices in the open market that has already risen by around Rs 350 per quintal to Rs 400 per quintal in the last one month.

Meanwhile, as per the decontrol proposal forwarded by the food ministry, the government plans to suitably amend the Sugar Control Order-1966 to do away with a requirement which stipulates that mills have to deliver 10% of sugar produced by a unit as ‘levy’ for public distribution system (PDS).

Instead states had to purchase sugar from the open market for distribution under PDS under the decontrol proposal. The decontrol proposals also include abolishing the release order mechanism of sugar or making it either quarterly, half yearly or yearly as part of its proposed move to de-regulate the sugar industry.

At present, government decides the quantum of sugar that each mill can sell in the open market every month. Among other proposals for de-controlling the sugar industry is abolishing that part of the control order that stipulates the distance between two sugar mills. Sources said the apparent political implications of such a move given that elections are just around the corner also went against immediate clearance of the proposal.

“Though the proposal is lying with the Cabinet for some time, but it is very unlikely that a decision would be taken very soon because of the political implications of decontrol,”a senior government official, who didn’t wish to be named said.

According to the industry sources, the country’s sugar production is likely to be around 26.5 million tonne during 2007-8 crushing season (October-September).

According to official estimates, the production was pegged at 25.1 million tonne by end of May 2008, which was well below 27.10 million tonne achieved during 2006-7. The country’s sugar production was only 12.6 million tonne during 2004-5 which rose 19.2 million tonne during 2005-6. During 2006-7, the sugar production reached record 28.3 million tonne.