High retail prices helped sugar industry recover costs and clear almost entire cane payments to farmers

Sugar tasted sweeter this year for the Rs 80,000 crore industry which saw bumper production, higher exports and signs of freedom from government control, but consumers had to pay Rs 10 per kg more for the commodity through the year.

High retail prices helped sugar industry recover costs and clear almost entire cane payments to farmers — worth Rs 52,000 crore in 2011-12 marketing year (October-September).

The year started on a good note with the Prime Minister appointing an expert panel in January to examine the decontrol of the sugar sector, ending on a hope that 2013 could be a landmark year with government freeing the only industry left under its control.

Sugar industry, on which five crore cane farmers depend, is controlled right from fixing the cane price to marketing of the sweetener.

Much to the industry’s liking, the expert panel headed by PMEAC Chairman C Rangarajan submitted a positive report on the decontrol of sugar sector in October with recommendation of immediate removal of two major controls – regulated release system and levy sugar obligation.

Through the release mechanism, the Centre fixes the sugar quota that can be sold in the open market and under the levy system, it asks mills to contribute 10% of output to run the ration shops costing industry Rs 3,000 crore a year.

Even before the report was submitted, the government had started to loosen its grip on the sector by relaxing the regulated release mechanism in April from monthly basis to quarterly, and then later to a four-monthly exercise. The move has helped mills manage inventories and cash-flows better.

The government has hinted that it would eventually phase out sugar quota allocation for open market sale. It has also started the consultation process with states on removing levy obligations and sugarcane pricing.

At the fag end of the year, Food Minister K V Thomas assured the industry leaders that Rangarajan report would not meet the fate of earlier reports.

“The decision on some of the recommendations will be taken in the next 4-5 months. It will take some time, we cannot take decision in haste. We are taking views of the state governments,” Food Secretary Sudhir Kumar said.

Way back in 1971-72 and 1978-79, the government had made attempts on decontrol. Agriculture Minister Sharad Pawar also tried for the decontrol in 2010 when he was holding the charge of Food Minister, but without any result.

Besides some action on the decontrol front, the year also witnessed surplus sugar production, prompting the government to initially allow exports of 2 million tonnes and then freeing shipments altogether in May.

Sugar output rose to 26.34 million tonne in the 2011-12 marketing year (October-September), as against 24.4 million tonne in the previous year. Exports from India, the world’s second largest producer but biggest consumer, stood at 3.4 million tonne, as against 2.6 million tonne in this period.

The government provided another major boost to the sugar industry by allowing price of ethanol (a bye-product of sugarcane) to be decided by the market forces.

In November, the Cabinet Committee on Economic Affairs (CCEA) approved that procurement price of ethanol would be determined by oil marketing companies and ethanol suppliers. It had fixed an ad-hoc price of Rs 27 per litre in 2010.

For more visit: Business Standard

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