Onus Rests On Industry For Sugar Decontrol

Updated: Oct 28 2002, 05:30am hrs
The sugar industry is virtually moving towards a total decontrol through the orders of several courts dismantling the periodic release mechanism for free sale of sugar. The tag of 10 per cent obligatory sale of sugar to the government at a predetermined price for catering to the needs of the public distribution system (PDS) is also likely to be removed shortly as assured.

The only itching point for the industry that may or may not remain is the fixation of cane price to be paid to farmers. This can be solved by industrys initiatives. A section of the industry, particularly the sugar cooperatives in Maharashtra in the current scenario of dismantled release mechanism has already taken up the onus of fixing the base ex-factory prices of sugar and the quantity of sugar to be sold to the traders. This fixation of the quantity to be released and base ex-factory prices will also be reviewed time to time in response to market situations by the Maharshtra sugar cooperatives. If the industry can do this then certainly they can fix a market-oriented rational cane prices to be paid to farmers.

In the current scenario, if the government takes a quick decision to abolish the system of procuring 10 per cent sugar from mills at a predetermined price, the fixation of statutory minimum price (SMP) for canes will have practically no relevance. Currently, the country average SMP for canes is Rs 645 per tonne linked to sugar recovery of 8.5 per cent. SMPs are also fixed zonewise and millwise, taking into account the estimated differential sugar recovery percentage and cost of cane production. The price of levy sugar which the government procures mandatorily from mills are determined on basis of these SMPs.

SMPs are not the cane prices which are actually paid to farmers. Many sugar producing states declare state advised prices (SAPs) for canes, basing mostly on political criteria and less on economic reasons. In the current sugar year the UP government has announced Rs 95 a quintal as SAP for canes linked to sugar recovery of 8.5 per cent. Centering the declared SAPs the mills negotiate with farmers the purchase price for canes. Mills have often complained that they are paying higher cane prices which is eating into their profitability and this is due to the irrational fixation of SAPs.

Last year, on the demand from the industry, the government asked the Commission for Agricultural Costs and Prices (CACP), which already fixes the SMPs, to determine the actual price at which the canes should be procured from farmers. But a year has lapsed and the CACP seems to have cooly shelved the issue!

Now, it seems that the industry have to solve this problem and they should rightly. One of the main criteria, which the industry was suggesting to the CACP to consider, was fixation of cane prices for the coming sugar year on basis of 60 to 65 per cent realisation by mills on sugar sales of the previous year.

If this happens in the current scenario of dismantled periodic release mechanism for freesale sugar coupled with the likely removal of levy procurement by government, the industry would be totally decontrolled.

Time is now for the industry to collectively decide which way to go and how. For the government to totally decontrol the industry is only one simple step ie to remove the 10 per cent levy obligation. But the major onus is on the industry.

It is a section of the industry which had gone to the courts asking for dismantling of the peroidic release mechanism on some pretext or the other. Now, as they have created this situation, they need to solve it in their own interests. Will the industry take this opportunity for total decontrol instead of asking the government to reinstate the periodic release mechanism and work under state intervention

In all perfect interests, the industry, at this point of time, should take up the onus of fixing the quantity of sugar to be released in a particular period and determine the prices at which they should sell to traders on a countrywide basis.

They should also fix the cane prices to be paid to farmers against specific sucrose content. Industry and sugar dealers should actively participate in futures trading. If this is done, the industry needs not bank on the governments assurance for funding buffer stocking of sugar.