Column : A sweet move by Rangarajan
Abinash Verma: Oct 13 2012, 02:02 IST
The sugar sector is highly controlled by the government through various regulations, mostly archaic and unreasonable. Controls like a regulated release mechanism and the burden on industry to supply levy sugar at a discounted price for the public distribution system were introduced much before India gained its independence in 1947. The industry suffers an annual loss of R3,000 crore by supplying levy sugar. The release mechanism denies the mills their rights to plan their sugar sales, stocks and cash flows, very essential to timely payment of cane dues to farmers, especially during the crushing season when the cash needs are at the maximum. Quantitative restrictions and delayed permissions for specific time periods for sugar exports have resulted in lost opportunities, leading to high sugar inventories, crashing sugar prices and cane price arrears. The compulsion of packing sugar only in jute bags has not only removed competition from the packaging sector, but resulted in annual losses of R1,000 crore to the mills.
On the sugarcane side, politics in cane pricing by some states has hit the industry quite badly. The unreasonably high cane prices fixed as SAPs, without any economic basis or linkage to the final product prices, has made the industry uncompetitive within and outside the country. Indian sugar often gets priced out from the global market due to high costs of production. Payments to farmers in some years get delayed if the returns to mills are low, leading to huge cane price arrears. The absence of any relationship between
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