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Sugar industry still needs more reforms
Fri, 31 Jan Pre-Open

The sugar industry is one of the most regulated industry in India. In order to deregulate the industry the government has undertaken some reforms. Last year the government decided to abolish the regulated release mechanism and remove the levy burden from the sugar industry. Then the government provided interest-free loans worth Rs 66 bn and cash subsidy on raw sugar exports. The question now being raised from several quarters is whether the government has done enough for the ailing Indian sugar sector.

This question will continue till a decision is taken on the reforms on the sugarcane-side controls. The sugarcane economy has been distorted and left uncompetitive by prevalent pricing mechanisms. It is time that the central and state governments address sugarcane controls and come up with a rational pricing mechanism , in line with global standards. Further, the pricing must ensure some linkage between cane price and sugar price.

This is also a strong recommendation by Rangarajan committee. The committee had suggested a revenue-sharing formula under which the sugar mills would be obliged to distribute about 70% of their total revenue from the sale of sugar and its byproducts .To meet the immediate cash needs of the cane growers, the industry will have to pay them at the time of cane delivery an amount equivalent to the fair and remunerative prices (FRP) fixed by the Centre. Such a pricing mechanism will do away the need for the states to fix cane prices.

The sugar industry needs urgent reforms. Although the government has undertaken partial deregulation, much more needs to be done. The government has to find political courage and will to link cane prices to sugar prices, which is the global trend. The earlier this is done, the better it will be for all the stakeholders.

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