Sugar producers say the government has been unwilling to raise the duty to 35 per cent as demanded by them even after expressing readiness to hike it to as high as 150 per cent in the WTO negotiations last year.

While officials describe the policy changes as a step forward in the era of free market, the Indian sugar producers are apprehensive about the long-term effect of the government's move.

Government, on the other hand, maintains that the imports are not going to pose more problems and says a liberalised regime cannot shy away from opening all the sectors to multinationals.

``The reaction of Indian sugar producers is very natural as they were givenenough protection till now, but an economy which is open to one sector cannot say no to the other,'' says secretary, department of sugar and edible oil, RP Singh.

Referring to the recommendations of the high-powered Mahajan committee on functioning of sugar industry set up in 1997, Singh says ``the government may have overlooked one or two recommendations of the committee to which the sugar lobby is overreacting, but tomorrow when it considers other recommendations in favour of the industry, all will be well.''

However, director general of Indian Sugar Mills' Association (ISMA), SL Jain, counters by saying ``we need to open up and compete with the world market in a liberalised regime but when governments all over the world have given priority to domestic markets, why should India not think of at least giving an `even playing field'.''

Why should the government continue with controls if at all it is going to be a competitive market, he asked.

Sugar producers the world over are protecting their sugareconomies by imposing hefty import duties ranging from a 37 per cent for Pakistan to as high as 288 per cent for European Economic Community (EEC). India has a duty of five per cent with a countervailing charge of Rs 850 per quintal, lowest in the world.

Large stocks of exportable sugar coupled with currency crash in major importing countries like Russia and Indonesia have rendered the international sugar prices decline precipitously by about 90 dollars in the last one year, says Jain.

The situation is further precipitated by Pakistan reportedly flooding sugar into India at a concessional rate of Rs four per kg, he alleges.

According to Jain ``the consumer interest will be seriously undermined as with the large- scale Indian purchases the cost of imported sugar is bound to go up significantly, as we have seen the international sugar prices fluctuate in last two decades from a low level of $ 225 per quintal to a high of over $ 65o per quintal.''

``Sugar prices in world market are often being determinedon the basis of major player contributing around 25 per cent of world export of sugar,'' he says.

Domestic sugar production for 1998-99 season (Oct-Sept) is estimated to be around 150 lakh tonnes as against 128 lakh tonnes in the current season, added to that the carry-forward stock from the last season stands at 65 lakh tonne and an offloading from overseas is some seven lakh tonnes.

As the current consumption of sugar is only 150 lakh tonnes, meaning thereby an additional stock of 72 lakh tonnes in the domestic godowns for the coming year, the sugar millowners in the country are very apprehensive about the future, if government decides on continuing the import.

While ISMA maintains that delicensing is a non-issue now as the government had already switched over to free licencing long back in 1995 itself, however, the national cooperative union of India (NCUI), which contributes around 60 per cent of the total sugar production in India has questioned the move to delicense the industry.

``Bypassing therecommendations of high-powered Mahajan committee on functioning of sugar industry set up in 1997, the government, by delicensing, has given a major chunk to multinational sugar companies without giving enough level playing field to domestic producers,'' says Shivajirao Patil, president of NCUI.

Reduction in distance between two units will lead to setting up of new factories close to the existing ones which will adversely affect the functional viability of all, he says.

``It is estimated that each mill of standard crushing capacity of 2500 tonnes a day needs a cultivated area of 6000 to 8000 hectares of land. This means a fair radius of 25 km between two mills, which was the earlier norm,'' says Patil.

The solution, however, lies in vertical expansion of existing units to make the sector globally competitive rather than allowing more units to be set up.

``The industry incurs huge losses by way of contributing 40 per cent to the public distribution system far below the cost of production, why not doaway with the system at all,''Jain asks.

The sugar industry feels that along with delicensing, the government should decontrol the industry in totality in line with the recommendations of Mahajan committee and save the sugar industry from plethora of controls in order to make it internationally competitive.